Economy Engineering
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
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