Understanding Simple Interest Calculations
Uploaded by
ScribdTranslationsUnderstanding Simple Interest Calculations
Uploaded by
ScribdTranslationsSIMPLE INTEREST
[Link]
We begin with the second part of financial mathematics, to
Well, we need to have a good understanding of the topic of percentage discussed in the chapter.
anterior.
Simple interest is called the financial operation where a
capitala predetermined payment time and a rate or reason, for
obtain a certain economic benefit called interest.
The most well-known formula for simple interest is:
I
tu.0
01
Where I = interest or money to be received or paid
C = capital or money to consider
R = rate or ratio
T = agreed time of the operation
ut = unit of time considered.
Example: Calculate the interest produced by a capital of $5000
placed during
3 years at 9% annual.
C = 5000 $ T = 3 years R=9% ut = 1 year
therefore I = 5000 . 9 . 3= 1350 $
100 . 1
clarification: the unit of time is the numerical value of the phrase that
appears in the reason
example: reason 4% annual represents:
1 year = 12 months = 2 semesters = 3 quarters = 4 trimesters = 6
bimestres = 360 días
The given time T and the ratio must have the same units before extracting.
accounts
Example: A capital of $4000 is placed at 5% per month for 3
bimesters, calculate in interest earned:
C = 4000 $ R = 5% monthly ut = 1 month T = 3 bimesters
9 months
I = 4000 . 5 . 9 = 1800 $
100 . 1
Financial mathematics begins after this topic to use a
reduced formula of simple interest with the aim of being able to deduce
others more complex, therefore the following modifications are made:
rate >>> i = R period >>>> n = T
100 or
now the rate (i) and the period (n) are replaced in the original formula:
The main formula is reduced to I = C . i . n
AMOUNT: It is the capital invested plus interest earned
M = C + I
Combining both formulas >>>>>>>>>> M = C + C . i . n
Factoring (common factor, inverse of the distributive property)
>>>>>>>>>>>>>
>>>>>>>>>>>>>>>>>>>> M = C . ( 1 + i . n )
Examples:
EXERCISE ONE: A capital of $5000 is placed in a bank at 4%
monthly for 8 bimonthly periods. Indicate the value of interest and the amount.
First, the times must be 'fixed' .......... R = 4% monthly
T = 8 bimesters = 16 months
Then if R = 4% then i = 0.04
When the times are converted, Time is equal to the period 'n'.
……….n = 16
So I = C . i . n = 5000 . 0,04 . 16 =
3200 $
The amount will be >>>>>> M = C + I = 5000 + 3200 =
8200 $
In this case, it could also be found with the other formula:
M = C . ( 1 + i .n ) = 5000 . ( 1 + 0.04 .16 ) = 5000 . ( 1 + 0.64) = 5000 .
1,64 = 8200 $
EXERCISE TWO: A capital of $800 transformed into $850 in 2
bimesters.
Calculate the monthly rate.
C = 800 $ M = 850 $ therefore I = 50 $ T = 2 bimesters = 4
months.
I = C . i . n
50 = 800 . i . 4
50 = 3200 . i
50 / 3200 = i
0.015 = i
This means that the monthly rate is 0.015 or the ratio is 1.5 %
monthly
A certain capital turned into $25,000 in two quarters, if it
It applied a 3% monthly. What was the initial capital?
C = x (need to find out) M = 25000 $ T = 2 trimesters = 6
months
R = 3 % i = 3 / 100 = 0.03
With this data, the only formula capable of solving the problem is:
M = C . ( 1 + i . n )
25000 = x . ( 1 + 0.03 . 6 )
25000 = x . ( 1 + 0.18 )
25000 = x . 1.18
25000 / 1,18 = x
21186.44 = x C =
21186,44 $
Indicate the time during which a capital of $3000 was placed that
when deposited at an annual rate of 0.09, it obtained a profit of 400
$.
T=x n=x C = 3000 $ i = 0.09 annual
I = 400 $
This problem can be solved with the formula:
I = C . i . n 400 / 270 = n
400 = 3000 . 0.09 . n 1,4814 = n
400 = 270 . n
This number is expressed in years (as the rate indicates),
we are going to transform it into a more real time, for this it must be interpreted
the following:
1, 4814 years = 1 year + 0.4814 year = 1 year + 0.4814 x 12
meses =
1 year + 5.7768 months = 1 year + 5 months + 0.7768 months
=
1 year + 5 months + 0.7768 x 30 days = 1 year + 5 months +
23 days
Other examples:
A certain capital was transformed into $4600 in 4 quarters, if it was applied
1% per month. What was the initial capital and the interest earned?
2) Find the percentage applied to a capital of 800 $ to transform into
700 $
3) Indicate the value of the capital that when placed at 5% bi-monthly for 3
They produced an amount of $6900.
A capital of $640 undergoes a 20% increase and then a discount of
same value, find the final amount.
A capital of $900 becomes $980 in one year. Calculate the
interest, the reason and the bimonthly rate.
A man deposits $500 in a bank that pays him 4% bimonthly.
year, then withdraw a quarter of the amount and place it in another bank at 5%
bi-monthly for half a year, with the leftover money he spends 40% on
passages and 30% on clothing. How much money does he have left to venture?
the trip?
Calculate the time a capital of $500 was deposited if it was obtained
a profit of $30 when placed at 6% bimonthly.
8) Indicate the final percentage increase that a product experiences if it was worth $400.
And they were given three consecutive increases of 10% each.
9) $4000 are deposited on March 1 and withdrawn on July 31. If the reason
era del 4 % bimestral. Calcular el interés y el monto.
10) Calculate the time a capital of $4000 was deposited if it
he obtained a profit of $500 by being placed at 6% annually.