General Mathematics Summative

Which of the following situations BEST illustrates simple interest?

• Sarah invests ₱1,000 in a savings account that pays 5% interest annually.

• James invests ₱500 in a savings account that compounds interest monthly.

• Lisa invests ₱2,000 in a high-yield bond that earns 7% interest annually.

• Michael invests ₱1,500 in a mutual fund that pays dividends quarterly.

Answer explanation

Sarah's investment of ₱1,000 at 5% interest annually illustrates simple interest, as it calculates interest only on the principal amount, unlike the other options that involve compounding.

Which of the following statements BEST describes compound interest?

• Compound interest is calculated based on the initial principal amount only, without any changes over time.

• Compound interest is calculated by applying a fixed interest rate to the investment.

• Compound interest takes into account the accumulated interest and adds it to the principal for future interest calculations.

• Compound interest is calculated by multiplying the principal amount by the interest rate.

Answer explanation

The correct choice explains that compound interest includes accumulated interest, which is added to the principal for future calculations. This distinguishes it from simple interest, which only considers the initial principal.

What distinguishes compound interest from simple interest?

• Compound interest is calculated based on a fixed interest rate, while simple interest can vary.

• Compound interest takes into account the accumulated interest, while simple interest does not.

• Compound interest is earned on the principal amount only, while simple interest is earned on both the principal and accumulated interest.

• Compound interest is usually higher than simple interest.

Answer explanation

Compound interest is calculated on the initial principal and also on the interest that accumulates over time, while simple interest is only calculated on the principal amount. This distinction is key in understanding how each type grows.

You get a student loan from the New Bislig Educational Assistance Foundation to pay for your educational expenses this year. You borrowed P30,000 last September 10, 2023 at 8% for 1 year. What is the term of the loan?

• Sept. 10, 2023

• Student loan

• 1 year

• 8%

Answer explanation

The term of the loan refers to the duration for which the loan is borrowed. In this case, the loan is for 1 year, as stated in the question. Therefore, the correct answer is 1 year.

You get a student loan from the New Bislig Educational Assistance Foundation to pay for your educational expenses this year. You borrowed P30,000 last September 10, 2023 at 8% for 1 year. How much is the interest?

• 8%

• 2,400

• 30,000

• 32,400

Answer explanation

To calculate the interest, use the formula: Interest = Principal x Rate x Time. Here, Interest = 30,000 x 0.08 x 1 = 2,400. Thus, the correct answer is 2,400.

You get a student loan from the New Bislig Educational Assistance Foundation to pay for your educational expenses this year. You borrowed P30,000 last September 10, 2023 at 8% for 1 year. What type of interest is applied?

• Simple Annuity

• Simple interest

• General Annuity

• Compound interest

Answer explanation

The loan is for a fixed amount at a fixed interest rate over a set period, which qualifies it as simple interest. Simple interest is calculated only on the principal amount, unlike compound interest which accrues on both principal and interest.

Karen invested ₱3,500 in a savings account with a compound interest rate of 5%. After 2 years, she decided to withdraw the interest earned. If the interest is compounded annually, how much interest will Karen receive?

• ₱3858.75

• ₱3430.50

• ₱1752.45

• ₱1923.50

Answer explanation

To calculate the interest earned, use the formula A = P(1 + r)^t. Here, P = 3500, r = 0.05, and t = 2. A = 3500(1 + 0.05)^2 = 3500(1.1025) = 3858.75. Thus, Karen receives ₱3858.75.

A principal amount of ₱5,000 is invested in an account that earns an annual interest rate of 4%, compounded quarterly. What will be the balance in the account after 3 years?

• ₱5,625.00

• ₱5,648.10

• ₱5,634.13

• ₱5,720.60

Answer explanation

To find the balance, use the formula A = P(1 + r/n)^(nt). Here, P = 5000, r = 0.04, n = 4, and t = 3. Calculating gives A = 5634.13, so the correct answer is ₱5,634.13.

If you deposit ₱290 into a bank account at the end of each month for the next 4.5 years, what is the total number of payments made?

• 47

• 48

• 50

• 54

Answer explanation

To find the total number of payments, multiply the number of years (4.5) by the number of months in a year (12). 4.5 years x 12 months/year = 54 payments. Thus, the correct answer is 54.

It is a sequence of payments made at equal (fixed) intervals or periods of time.

• Annuity

• Compound interest

• Installment

• Simple interest

Answer explanation

An annuity is defined as a sequence of payments made at equal intervals. This distinguishes it from other financial terms like compound interest, which involves interest on interest, and simple interest, which is calculated on the principal only.