Simple Interest


1. Determining the Interest and the Amount

The formula for determining interest is given as:
I = Prt, where
I = interest
P = principal or the borrowed amount
r = interest rate
t = time or the duration of the loan/investment

Example 1:
Mr. Paulo Roque borrowed Php2,600 from Mr. X at an interest rate of 5%, what is the interest in 3 years? How much should Mr. Paulo Roque pay at the end of 3 years?

SOLUTION:

Given:
P = Php2,600
r = 5% or 0.05 (per year)
t= 3 years
I = ?

I = Prt
I = (2,600)(0.05)(3)
I = (2,600)(0.15)
I = Php390

Then, to find the total amount to be paid at the end of 3 years, the formula for computing it is

A = P + I, where
A = sum or total amount to be paid
P = principal
I = interest

Thus,
A = P + I
A = Php2,600 + Php390
A = Php2,990

Example 2:
How much interest will be charged if Dominic Daez borrows Php15,000 for 2 years at interest rate of 9%?

SOLUTION:

Given:
P = Php15,000
r = 9% or 0.09 (per year)
t = 2 years
I = ?

I = Prt
I = (15,000)(0.09)(2)
I = (15,000)(0.18)
I = Php2,700

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