Learning Activity Sheet

Grade Level/
Grade 12 BUSINESS MATHEMATICS Quarter 2
Subject

Topic Word Problems on Interest and Commission Week 2

Solve word problems involving interests and

MELC Competency 19
commissions

Identify types of interest calculations. Duration 4 hours

Specific Define the types of interest calculations.
Objectives: Solve word problems involving interest and
commission. Score

I. Let’s Know
Good day everyone! How are you today? I hope that you are all fine and always ready
to face our next session today. Previously, we have discussed commission on a cash basis
and commission on an installment basis. Is there any question or clarification regarding our
previous lesson? If there is none, let us proceed to our next topic.
Today, we will be discussing how to solve mathematical problems involving interest and
commission. Before I will present to you some examples of how to solve these, let us consider
first the basic concepts of these different terms.

Basic Concept of Interest:

What is interest?
When we say, interest in mathematics, it is a percentage of some amount of money. It
could be the amount of money you pay someone for having lent your money or it could be the
amount of money you received from somebody because you allow him or her to use your
money. (Reyes & Reyes, 2016)
In other words, interest is the money you owe (if borrower) to a lender or the money you
earn (if lender or depositor in a bank) for lending or saving/depositing money.

Now, there are 2 types of Interest Calculations:

1. Simple Interest:
What is simple interest? Simple interest is the interest paid only on the original principal
amount and is paid/ received at the end of the loan/ deposit period based on the agreed time
and rate. In other words, if the rate is agreed per year, the time is also expressed in years.
But, if the agreed rate is per month, the time must be expressed also in the month.

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The following will be the variables in our mathematical treatment for simple interest:
Or this is the formula or equation used on how to solve for simple interest:
I = Prt or I = (P)(r)(t)
Where: I = amount of interest paid or received
P = principal amount of the loan or investment
r = annual rate of simple interest
t = time period (term) of the loan or investment (usually expressed in
years)

What about if the rate of interest is unknown, how to solve it? So, we will derive a
formula from the original one, I = Prt; therefore, to solve for the rate of interest, we have:
𝑰
r=
𝒑𝒕

To solve for the principal amount, we have this equation/formula:

𝑰
P=
𝒓𝒕

And to solve for the time, we have this equation/formula:

𝑰
t=
𝑷𝒓

Let us take these examples:

1. What amount of interest will be charged on ₱7,300 borrowed for 3 years at a simple interest
rate of 12% per annum?

In this problem, since we are asked to solve for the amount of interest, therefore, we have:
Solution:
Given:
P= ₱7,300
r= 12% or 0.12
t= 3 years

So, to solve for the interest we will use the formula

I = Prt
I = (7,300)(0.12)(3) - - multiply all the given (Use calculator if possible)
I = ₱2,628.00

Therefore, the principal amount will earn an interest of ₱2,628.00

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2. How much is the amount deposited in the bank, if the interest earned was ₱ 225.00 at 9%
per annum for 9 months only?

In the second problem, what is being asked here? It is the amount deposited in a bank,
which is the Principal amount. So, to solve it we will use the equation:
𝑰
P=
𝒓𝒕

Solution:
Given:
P= ₱ ?, I= ₱ 225.00, r = 9% = 0.09, t= 9 mos. (9/12 = 0.75)
𝟐𝟐𝟓
P=
(𝟎.𝟎𝟗)(𝟎.𝟕𝟓)
𝟐𝟐𝟓
=
𝟎.𝟎𝟔𝟕𝟓

P =₱ 3,333.33
Thus, the amount deposited in the bank was ₱3,333.33

3. If a certain loan amounted to ₱6,800.00 earned an interest of ₱1,904.00 for 4 years, what
simple annual rate of interest was charged on the said loan?

In this case, since we are looking for the rate of interest, so we will use the formula:
𝑰
r=
𝑷𝒕
Solution:
Given:
P = ₱6,800
r=?
I = ₱1,904
t = 4 years
Substitute the value in the given formula:
𝑰
r=
𝑷𝒕
𝟏,𝟗𝟎𝟒
=
(𝟔,𝟖𝟎𝟎)(𝟒)
1,904
r=
27,200
r = 0. 07
Thus, the rate of interest charged on the given loan was 0.07 or 7%

4. The interest earned on ₱8,000.00 term deposit was ₱1,200.00. How long was the term if
the rate of interest was 6% per annum?
In this problem, it is very clear that the term/time is being asked here. Therefore, to
𝑰
solve for the given unknown, which is the time, we will use the formula: t =
𝑷𝒓

Solution: Given:
P = ₱ 8,000
I = ₱ 1,200
r = 6% = 0.06
t=?

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 Again, substitute all the given in the said formula:
𝟏,𝟐𝟎𝟎
t=
(𝟖,𝟎𝟎𝟎)(𝟎.𝟎𝟔)

𝟏,𝟐𝟎𝟎
=
𝟒𝟖𝟎

t = 2.5 years
Thus, the duration of the term deposit was 2.5 years or 2 years and 6 months.

Now, let us proceed to the next type of interest which is the compound interest:

2. Compound Interest
It is the procedure in which interest is periodically calculated and added to the
principal. The time interval between succeeding interest calculations is called the
conversion period (or compounding period or interval period). The interest earned
during a period is “converted” to principal at the end of the period because the principal
and the interest are combined and treated as the new principal for the succeeding
period. In other words, the combined interest to the principal amount earned in a period
will also earn interest in all succeeding periods.
Another important term that we need to understand in compounding interest is
the compound frequency or conversion frequency. When we say compound
frequency, is the number of compounding or conversion that takes place in a year.
Please refer to the given table below:

Compounding or Number of Compounding Compounding or

Conversion Frequency or Conversions Per Year Conversion Periods
Annual or Annually 1 every year
Semi-Annual/Semi-Annually 2 every 6 months
Quarterly 4 every 3 months
Bimonthly 6 every 2 months
Monthly 12 every month

The following will be the variables in our mathematical treatment for compound interest:

𝒓 𝒏𝒕
𝑨 = 𝑷 (𝟏 + )
𝒏

Where:
A = final amount/ Maturity value
P = initial principal amount
r = nominal interest rate
n = number of conversions per year
t = time period of the loan or investment (usually in years)

Reminder: In this type of interest, you need to use a calculator in solving word problems.
Let us take these given examples for compound interest

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Example:

1
1. Determine the final amount of ₱3 000 invested at 9.5% compounded semiannually for 3
2
years.
Solution:
Find the final amount (A).
Given:
P= ₱ 3 000
r= 9.5% or 0.095
n= 2 (semiannual)
1
t= 3
2

Substitute all the values in the given equation/formula. We have;

𝒓 𝒏𝒕
𝑨 = 𝑷 (𝟏 + )
𝒏
1
0.095 2(32)
A = 3 000(1 + ) , by using calculator, simplify first the
2
0.095
= 3,000 (1.0475)7 quantity inside the grouping symbol(1 + )
2
= 3,000(1.3838) before raising it by 7 (because 2*31/2 = 7)
A = ₱4,151.45
𝟏
Therefore, the Final amount/Maturity Value is ₱ 4 151.45 after 3 years.
𝟐

2. Find the interest earned at the end of 4 years if ₱36, 700 is invested at 12% compounded
bimonthly.
In this case, since interest needs to be solved, we will use the equation:
I=A-P
In other words, we need to find first the value of A (final amount/ Maturity value),
since compound interest is the difference between the final amount and the initial principal
amount. Therefore, to find the value of A, which is the final amount, identify first the:

Given:
P = ₱ 36 700
R = 12% or 0.12
n = 6 (per 2 months)
t = 4 years

Then use the formula:

𝒓 𝒏𝒕
𝑨 = 𝑷 (𝟏 + ) substitute all the given in the said formula, so we have
𝒏
0.12 6(4)
A = 36, 700(1 + ) simplify first the quantity inside the grouping symbol
6
0.12
= 36,700(1.02)24 using calculator, (1 + ) before raising it to 24 (the
6
product of 6 and 4 in the exponent)
A = ₱59 029.65

Then to find the value of interest earned at the end of 4 years, we have
I= A-P
I= ₱ 59, 029.65 – ₱36, 700
I= ₱22, 329.65
Therefore, the interest earned at the end of 4 years is ₱ 22 329.65.

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3. The maturity value of a five year, ₱7 000 compound- interest investment certificate was
₱9427.99. What quarterly compounded nominal interest rate did the investment certificate
earn?
Find the nominal rate (r).
Given:
A = ₱ 9 427.99
P = ₱ 7 000
n = 4 (per 3 months)
t = 5 years

𝒓 𝒏𝒕
𝑨 = 𝑷 (𝟏 + )
𝒏

𝑟 4(5)
9 427.99 = 7 000 (1 + ) Substitute the values above into the
4
equation
9 427.99 𝑟 20
= (1 + ) Divide both sides by 7 000.
7 000 4
20 9 427.99 𝑟 𝟐𝟎
√ =1+4 Place both sides inside a √ to eliminate
7 000
the power of 20 on the right side
20 9 427.99 𝑟
√ – 1= 4 Transpose 1 to the left side resulting to -
7 000
1
20 9 427.99
( √ – 1) 4 = 𝑟 Multiply both sides by 4 then solve for 𝒓.
7 000

Use the scientific calculator to solve for

𝒓 = 𝟎. 𝟎𝟔 𝒐𝒓 𝟔%; the answer.

Therefore, the nominal rate is 6% compounded quarterly.

4. Riana deposited ₱ 25 000 in a savings bank on January 13, 2013. At that time the bank was
paying 4% interest compounded quarterly. On July 13, 2015, the bank announced that it would
start paying 4.5% interest, compounded quarterly. How much did Riana have to her credit on
July 13, 2017?
Solution:
Find the Final amount or maturity value on July 13, 2017.
In this case, we need to compute two separate compound amounts.

Given:
1st condition; interest is at 4% compounded quarterly that will run from January 13,
2013 to July 12, 2015 (2. 5 years).
P= ₱ 25 000
r= 4% or 0.04
n=4 (per 3 months)
t= 2.5 years
𝒓
A= P(𝟏 + )𝒏𝒕
𝒏
0.04 4(2.5)
A = 25 000 (1 + )
4
A = 25 000(1 + 0.01)10
A = 25 000(1.104622125)

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 A= ₱27, 615.55

2nd condition; interest is at 4.5% compounded quarterly from July 13, 2015 to July 12,
2017.

Given:
P= ₱ 27 615.55 - - -Why use we this amount in the 2nd condition?

r= 4.5% or 0.045 It’s because that’s the final amount after

n= 4 (per 3 months) 2.5 years where the first scheme was

t = 2 years 4% rate of interest compounded quarterly.

Solution

𝒓 𝒏𝒕
𝑨 = 𝑷 (𝟏 + )
𝒏

0.045 4(2)
𝐴 = 27, 615.55 (1 + )
4
𝐴 = 27,615.55(1 + 0.01125)8
𝐴 = 27,615.55(1.01125)8
𝐴 = 27,615.55 (1.093624616)

𝑨 = ₱𝟑𝟎 𝟐𝟎𝟏. 𝟎𝟓
Thus, Riana’s total amount deposited until July 13, 2017 is ₱30, 201.05.

BASIC CONCEPT ON COMMISSION

It is a way of compensation mainly used to pay employees who sell the

company’s commodities or services. There are generally three types of
commission such as straight commission, salary plus commission, and graduated
commission.

Straight Commission
It is a type of commission wherein the salesperson’s earning or wage is
based on his/ her commission alone.

Straight Commission= Percent * Sales

Example: A real estate agent has a commission rate of 4%. If a piece of

property sells for ₱740 000, what is his commission?

Solution:
Commission = 0.04 * 740 000 = 29 600
Thus, the state agent’s commission is ₱29 600.

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 Salary plus Commission
It is a type of commission when an employee is being paid a guaranteed
salary plus commission on total sales made by the employee. To compute the
total gross pay, determine the amount of commission then add it to the salary.

Salary plus Commission = Salary + (Commission rate * Sales)

Example: Jayne dela Fuente works on a pay schedule of ₱ 21 300 per month
plus a 3% commission on all sales. If she sold ₱ 104 900 last month, what is
Jayne’s total gross pay?
Solution:
Commission= 0.03*104 900= 3 147
Salary plus Commission= 21 300 + 3 147 = 24 447
Thus, Jayne’s gross pay is ₱24, 447.00.

Graduated Commission
It is a commission given to salespersons who do not receive a regular salary
and the commission rate increases as the sales volume increases. In other
words, it is a commission that varies according to the sales target achieved.

Graduated Commission= yn if sales target achieved;

Where: n is the different levels of sales.

Example:

Evelyn de Guzman sells OHP projectors for WSS Tech Products. She
is on an incremental commission schedule of 2.5% of sales up to ₱ 100 000,
3% for the next ₱ 150 000, and 4% on sales greater than ₱ 250 000. What is
Evelyn’s total gross pay for last month if her sales volume was ₱ 300 000?
Solution:
Given:
Commission rate (level 1 or y1) = 2.5% or 0.025, sales up to ₱100,000
Commission rate (level 2 or y2) = 3 % or 0.03, sales up to ₱150,000
Commission rate (level 3 or y3) = 4% or 0.04, sales greater than ₱250,000
You can use this equation to find the commission per level:

Level Pay = Sales per level * Commission rate

Level 1 or y1 = 100 000* 0.025= 2 500
Level 2 or y2 = 150 000* 0.03= 4 500
For level 3, since it is stated there 4% on sales greater than ₱250 000. And so,
₱300 000- ₱250 000= ₱50 000, and then compute for the commission:
Level 3 or y3 = 50 000* 0.04= 2 000

Total Gross Pay = y1 + y2 + y3

Total Gross Pay= 2 500+4 500+ 2 000
=₱ 9 000
Thus, her total gross pay after all levels is ₱ 9 000.

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II. Let’s Perform & Practice
Answer the following with a complete solution.
1. An internet shop obtains a loan of ₱ 150 000 from a lending company based
on a simple interest rate of 10.25 % payable in two years. Find the interest
in two years?
2. Hannah receives a cash prize of ₱ 500 000 for winning the silver medal in
an international triathlon competition. She deposits it in a bank that pays
2.5% a year compounded monthly. What is the maturity value of her
investment after 27 months?
3. A cash- basis sales agent succeeded to close a deal with a client over a
real estate property worth 1.5 million pesos. The client paid only 30% of the
total contract price. Find the commission earned by the sales agent in the
deal.
4. Marlon, a boutique manager, earns a monthly fixed salary of ₱7 250 plus a
10% commission for each monthly sale above ₱ 25 000. Last month, the
total sales invoice reveals their shop made a sale of Php 32 000. Find
Marlon’s total income for that month.
5. Each month sales agents at Maharlika Trading Company are awarded a
commission of 5% for the first sale of ₱ 5 000, 8% for the next sale of Php
12 000, and 10% for sales over ₱ 20 000. Mr. Cordova, a sales manager,
made a total sale of ₱ 32 000. Find his total commission.

III. Let’s Connect / Let’s Analyze

Questions to ponder: (Refer to the problems in Let’s Perform and Practice)

1. What type of interest calculation is problem 1? Why do you say so?
2. What type of interest calculation is problem 2? Why do you say so?
3. What type of commission is problem 3? Why do you say so?
4. What type of commission is problem 4? Why do you say so?
5. What type of commission is problem 5? Why do you say so?

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IV. Let’s Answer

Write the letter of the correct answer on the space provided for you.
_____1. Fernando receives a 20% commission for every appliance he sells.
He sells a TV for ₱15 000, a refrigerator for ₱35 000, and ₱ 27 000 for a laptop
computer. Find the total commission he earned.
a. ₱ 15 400
b. ₱ 16 400
c. ₱ 17 000
d. ₱ 1 540
_____2. Mary has a monthly commission plan where she receives 2.5% on the
first sales during the month which is amounted to ₱100 000, and 3.5% on sales
which is above ₱100 000. If her total sales during the month are ₱ 150 000,
compute her commission.

a. ₱ 6 240
b. ₱ 6 420
c. ₱ 4 520
d. ₱ 4 250
_____3. Mr. Cruz decides to work for ABC company that will give him a 6%
commission on any sales above ₱3 000, and regular pay of ₱3 500 per week.
If he sold goods worth ₱5 000, what is his gross pay for that week?

a. ₱ 4 260
b. ₱ 3 620
c. ₱ 120
d. ₱ 210
_____4. If Marisol borrowed ₱430 000 from a commercial bank charging 15%
simple interest, how much would she pay at the end of 2 years?
a. ₱ 200 000
b. ₱430 000
c. ₱59 000
d. ₱129 000
_____5. Find the amount due if ₱46 000 is invested at 8% compounded
semiannually for 4 years.
a. ₱ 62 954.18
b. ₱ 62 954.17
c. ₱ 62 594.18
d. ₱ 62 594.17

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V. Let’s Explore / Let’s Create
Choose 3 among the 5 concepts given and create a real-world problem
portraying those concepts. Indicate also the solution on how to solve those
identified problems.
1. Simple interest
2. Compound interest
3. Straight Commission
4. Salary plus Commission
5. Graduated Commission

Rubric:

Criteria 10 6 2
Content All problems are Only 2 problems are 1-0 problem is
feasible and showed feasible and feasible.
an in-depth presented well.
understanding of the
concepts chosen.
They are also
presented
excellently.
Accuracy All solutions to the Only 2 solutions are 1-0 solution is
given problems are correct and are correct.
correct and are shown in detail.
shown in detail. Or, all solutions are
correct but not
detailed.

Writer: Editor:

DILBERT S. BAWIGA MAY ANN V. NABLE

Master Teacher I Teacher III
Sta. Ana National High School (SHS) Daniel R. Aguinaldo National High School

Evaluator:

BEVERLY T. REGIDOR
Master Teacher II
Biao National High School

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 Answer Key
Grade Level/
Grade 12 BUSINESS MATHEMATICS Quarter 2
Subject

Topic Word Problems on Interest and Commission Week 2

Solve word problems involving interests and

MELC Competency 19
commissions

II. Let’s Perform & Practice

1. ₱ 30 750
2. ₱ 528 900.11
3. ₱ 450, 000.
4. ₱7 950.
5. ₱2 710

III. Let’s Connect / Let’s Analyze

1. The interest calculation used in problem 1 is simple interest because it is clearly
stated in the problem.
2. The interest calculation used in problem 2 is compound interest since the interest
is compounded monthly.
3. The type of commission applied in problem 3 is straight commission since in the
problem the only pay the sales agent earned is just the commission.
4. The type of commission applied in problem 4 is salary plus commission since in
the problem Marlon earned a commission at the top of his salary.
5. The type of commission applied in problem 5 is graduated commission since it is
stated in the problem Mr. Cordova will receive a commission based on the achieved level of
sales.

IV. Let’s Answer

1. A 2. D 3. A 4. D 5. A

V. Let’s Explore / Let’s Create

Answer will be based on the given rubrics

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