1.3 Compound Interest

 
Compound Interest
 
Interest=(principal)(number of periods)(interest rate)
 
Example
 
If you borrow $2,500 for 4 years at 15%-per year simple interest
 
Interest per year = 2,500(0.15)=$375
Total interest = 2,500(4)(0.15)=$1,500
 
The amount after due is 2,500+1,500=$4,000

1.2 Simple Interest

 
Simple Interest
 
Interest=(principal)(number of periods)(interest rate)
 
Example
 
If you borrow $2,500 for 4 years at 15%-per year simple interest
 
Interest per year = 2,500(0.15)=$375
Total interest = 2,500(4)(0.15)=$1,500
 
The amount after due is 2,500+1,500=$4,000

1.1 Interest Calculations

 
Percent interest rate = interest accrued per unit time x 100%
                                                        original amount

Example

Invested $150,000 on March and withdrew a total of $159,750 exactly one year later.

Interest = 159,750-150,000 = $9,750

Percent interest rate = 9,750 x 100% = 6.5% per year
                                                     150,000