Mathematics in

Finance
Simple and Compound
Interest
Worst Money Mistakes
• Lack of planning and discipline
• Lifestyle Inflation
• Basing your success to others
• YOLO
• Not maximizing the opportunities
Does anyone have any interest in interest?
The difference between simple and compound interest
is this, simple interest grows slowly, compounding
speeds up the process.
Very few banks today pay interest based on the simple
interest formula. Instead, they pay interest by
compounding.
Consider this example: You begin with Php 1,000
invested at 10% annual interest rate.

After Simple Interest Compound Interest

1 year 1,100 1,100

2 years 1,200 1,210

3 years 1,300 1,331

4 years 1,400 1,464

50 years 6,000 117,390

Rates:

0.10%-.25%

2%-6%
“Okay pa rin! Kesa wala ay at least kumikita ang pera
ko.”
Simple Interest
𝑰 = 𝑷𝑹𝑻
= 𝟏𝟎, 𝟎𝟎𝟎 (. 𝟎𝟔)(3)
= 𝑷𝒉𝒑 𝟏, 𝟖𝟎𝟎
Brian deposited Php 10,000 for 3
year at a rate of 6% p.a. Find the
interest earned.
Simple Interest 𝑰
𝑹=
Prince deposits PHP 5,500 and got 𝑷𝑻
back an amount of PHP 5,995 after
a year. 𝟒𝟗𝟓
=
(𝟓, 𝟓𝟎𝟎)(𝟏)
a. Find the simple interest he got.
b. Find the interest rate for the =. 𝟎𝟗
transaction
= 𝟗%
𝑰 = 𝑷𝑹𝑻
𝑰
𝑹=
𝑷𝑻
Compound Interest
nt
æ rö
A = p ç1 + ÷
è nø
Compound Interest
PHP 5,000 is invested at 6% interest
compounded yearly for 5 years.
.06 (")($)
nt = 5,000(1 + )
æ rö 1
A = p ç1 + ÷
è nø = 5,000(1.3382255776)

= 𝑃𝐻𝑃 6,691.13
Compound Interest
PHP 500 is invested at 6% interest
compounded quarterly for 10 years.
.06 (%)("&)
nt = 500(1 + )
æ rö 4
A = p ç1 + ÷
è nø = 500(1.8140184 … . )%&

= 𝑃𝐻𝑃 907
Stock Market
 Risk Appetite
• MP2
Low • Bonds (Corporate or Government)

• Mutual Funds
• Trust Funds
Moderate • REITs

• Stocks
• Cryptocurrencies
Aggressive • Forex
Fact check:
55 % of American invest in stock market.
- Forbes magazine
48.07% of Singaporeans have money invested in the stock market
- Singapore Business Review

Less than 1% of the total population of the Philippines invests in the

stock market.
- Dailypik
Reasons why Filipinos do not invest in Stock Market
• lack of knowledge
• fear of risks
• lack of money

Do you agree?
 Definition What is stock market?
allows buyers and sellers of
What is a stock? securities to meet, interact, and
A portion of ownership in a transact.
corporation. It is a way for a
corporation to raise money. Also
known as shares
Pros and Cons of Owning Stocks
Pros Cons
• Claim on assets
• Dividends and capital gains • Loss of capital
• Liquidity • Stress if you’re a TRADER
Stock Exchanges
Stock goes up and down
Stock value increases and decreases according to the
company’s performance and how people think the company
will do in the future.

Can you lose everything in the market?

If you are foolish, yes.

If you invest more than you can afford to lose, and the stock
loses value, you are in trouble.
If you invest only what you can afford, and diversify your
investments, you can do very well. If you diversify, even if one
investment loses money, the others will still be okay. Stock
prices go up and down a lot. If you lose money today, the stock
can still go up tomorrow.
You only lose if you sell!
 Important Terms to remember!
• Paper Gain/Loss
• Red and Green
• Realized Gain/Loss
• Average Down
Bought 100 shares of stock at PHP 100 PHP 10,000

Bought 100 shares of stock at PHP 90. PHP 9,000

Average Cost = TOTAL AMNT / TOTAL SHARES

Average Cost = 19,000 / 200 = P95
 Bought 500 shares of JFC stock at PHP 240 PHP 120,000

Bought 700 shares of JFC stock at PHP 102. PHP 71,400

Average Cost = TOTAL AMNT / TOTAL SHARES

Average Cost = ?

Average Cost = 191,400/1,200 = P159.50

Bull and Bear Markets
Economists describe the
stock market activity as being a:
Bull Market
• steadily rising stock market
over time
Bear Market
• steadily falling stock market
over time
Why should I buy stock?
Stockholders can earn profit in two ways:
1. Capital Gain: When a stock holder sells stock for more than he
or she paid for it.
Example:
I bought a share of Jollibee for PHP 95 and sold
at a price of PHP 200.

When a stock holder sells stock for less than he or

she paid, it is a capital loss.
Why should I buy stock?
Stockholders can earn profit in two ways:
2. Dividends: A dividend is a distribution of a portion of a company's
earnings, decided by the board of directors. The purpose of dividends is
to return wealth back to the shareholders of a company.
Things to know
Declaration Date
-This is the date that a company announces it is paying a dividend. A declaration statement is
issued which includes details such as the size of dividend, the record date and the payment date
Ex-Dividend Date (or Ex-Date)
-In order to receive the next scheduled dividend, you must own the stock before this date.

Record Date (or Date of Record)

-This is the date that you must be on the company's books as a shareholder of record to receive the
dividend.
Payment Date
-This is the scheduled date on which a company
will pay a declared dividend to shareholders of
record.
Example:
Ted bought 100 shares of AAPL at $110 per share. After 2
months, he sold all his shares at $123/sh.
Beginning Balance/Capital 100 shares x $110 = $11,000

Selling Transaction 100 shares x $123 = $12,300

$12,300 - $11,000 = $1,300

Profit
 Example:
Patrick bought 10 shares of PLDT for PHP 850. On July 30, PLDT
declares a dividend payable on September 5 to its shareholders.
Patrick decided to sell all of his shares on August 15 at
P1,650/share. How much is his total profits/losses?

Stock Dividend Ex-Dividend Record Date Payment Date

(Cash) Date

PLDT PHP 28 Aug 15, 2022 Aug 18, 2022 Sep 5, 2022
PLDT PHP 47 Aug 15, 2022 Aug 18, 2022 Sep 5, 2022
COMPUTATION:
Patrick bought 10 shares of PLDT for PHP 850. On July 30, PLDT declares a dividend payable on September 5 to its

%
shareholders. Patrick decided to sell all of his shares on August 15 at 1650. How much is his total profit/losses?

Stock Dividend Ex-Dividend Date Record Date Payment Date

(Cash)

PLDT PHP 28 Aug 15, 2022 Aug 18, 2022 Sep 5, 2022
PLDT PHP 47 Aug 15, 2022 Aug 18, 2022 Sep 5, 2022

Shares Price Amount

Beginning Balance / 10 PHP 850 PHP 8,500
Capital
Capital Gain
Shares Price Amount
10 ₱1,650.00 ₱16,500.00
(8,500)
PROFIT ₱ 8,000

Dividend Income
Eligibility Shares Dividend Earnings

10 28 ₱ 280
TOTAL PROFIT: ₱ 8,750
10 47 ₱ 470
Example
Bought 70 shares of PLDT at P1,450/share.
Capital 70 shares x P1450 = P101,500

CURRENTLY 70 shares x P1100 = PHP77,000

PAPER LOSS of P24,500

Example
Bought 70 shares of PLDT at P1,450/share.
Year Dividend History/share Dividend Income

2019 75/share 75 x 70 shares = P5,250

2020 78 78 x 70 = 5460
2021 84 5,880
2022 134 9,380
2023 108 7,560
TOTAL DIVIDEND INCOME PHP 33,530
Important lesson:
• Before jumping to investment, you must know to allocate to
the basic foundations in finances.
• Maximizing these opportunities using the power of
compounding interests.
• Time is money.