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simple interest

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  Simple Interest Basic terms    Interest  –  an amount charged for the use of money    Principal  –  the amount of money borrowed    Term  –  the length of the transaction period; it starts on the srcin date and ends on the maturity date    Maturity value  –  the amount of money received at the end of the term; the sum of the principal and the interest earned. Also known as Future Value .    Simple interest  –  a type of interest wherein only the srcinal principal earns interest for the duration of the term    Formula for simple interest   Example. Find the interest earned after 3 years if Php12,000 is deposited in a savings account which earns 5% simple interest. Formula for the maturity value F  : F = P + Is ã F is a future value, received at the end of the term. In this context, we say that the principal P is the current or present value of F  . Example. What is the maturity value of an 8,000-peso debt payable in 2 years at 12.75% simple interest? What is amount of interest? Derived formulas: Example: A 5-year investment had a maturity value of Php27,500. If the applied rate was 7.5% simple interest, what was the srcinal principal? Example: At what simple interest rate was Php16,500 invested if it earned an interest of Php1,620 just after 1.5 years?  Example: How long will it take a Php30,000 debt to earn an interest of Php4,500 if the simple interest being charged is 9%? All about time ã In number of months ã In number of days Ordinary Interest: Exact Interest: ▫ Note: Default is Ordinary interest ▫ Note: Default is Ordinary interest ã In between two dates Actual time  –  count the actual number of days of each month ▫ Approximate time –  assume each month has 30 days Example: the term is from February 2 to May 21, 2015.    ▫  Ordinary Interest, approx. time:   = 109 360 Ordinary Interest, actual time:   = 108 360    ▫  Exact Interest, approx. time:   = 109 365    ▫  Exact Interest, actual time:   = 108 365    All about time    ã In between two coinciding dates ▫ Count the number of months   ▫ From March 21, 2016 to July 21 , 2016, there are 4 months. Thus,     =4 12    ã Note: if t is not whole number or exact decimal, express in    fraction. e.g. if the term is 5 months, write t = 5 NOT 0.42 12 Example. Accumulate Php14,500 at 6.25% simple interest for 1 year and 6 months. ( To accumulate means to find the maturity value.) Example. Find the present value of Php100,000, which is due in 200 days, if money's worth is 10.5% simple interest.  Example. Find the maturity value of a 150,000-peso investment from May 24, 2011 to January 12, 2012 at 7.25% simple interest. There are 233 days between the two dates. Example. Find the maturity value of a 50,000-peso debt at 8.15% from May 24, 2011 to January 24, 2012. Example. Melba lends Php50,000 to Jane on October 1, 2010 at 9% simple interest. Jane promised to fully settle the debt on March 28, 2011. Find the amount Melba will receive on the maturity date using:    a. Ordinary interest; actual time b. Ordinary interest; approximate time c. Exact interest; actual time d. Exact interest; approximate time
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