Interest Calculations and Examples
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ScribdTranslationsInterest Calculations and Examples
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ScribdTranslationsThe interests
Correction - Simple interests
What is the amount of capital that, placed for 50 days at an annual rate of 6%, yields 65?
€ interest?
I = (C x N x T) / 360
C = (I * 360) / (N * T)
N: duration expressed in days of placement or borrowing: 50
Annual interest rate for a unit value: 0.06
I: amount of interest accrued: 65
C = (360 x I) / ( N x T ) = = (360 * 65) / (50 * 0,06) = 7800 €
2. At what annual rate should one invest €11,800 to obtain an accrued value in 5 months of
12,021.25 € ?
I = (C x N x T) / 12
T= (I * 12) / ( C * N)
C: amount of initial capital invested or borrowed: 11,800
N: duration expressed in months of investment or borrowing: 5
I: amount of accrued interest: (12,021.25 - 11,800) = 221.25
T = ( 12 * I ) / ( C * N ) = ( 12 x 221.25 ) / (11,800 x 5 ) = 0.045 = 4.5%
3. In how many days does a capital of €24,800 placed at an annual rate of 7.30% yield a
interest of 307.52 € (calendar year of 365 days)?
I = (C x N x T) / 365
N = ( 365 * I ) / ( C * T )
C: amount of initial capital placed or borrowed: €24,800
I: amount of interest accrued: 307.52
T: annual interest rate for a unit value: 7.30%
N = ( 365 * I ) / ( C * T ) = (365 * 307.52) / (24,800 * 0.073) = 62 days
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What amount borrowed on July 26 at an annual rate of 5.5% is repaid on December 14?
by a reimbursement of €24,517 (taking the months of the calendar)?
July: 6 days + August: 31 days + September: 30 days + October: 31 days + November: 30 days + December: 13
jours = 141 jours
I = (C x N x T) / 360
C = (360 * I) / (N * T)
N: duration expressed in months of investment or borrowing: 141
I: amount of accrued interest: 24,517 - C
annual interest rate for a unit value: 0.055
24 517 – C= (C * 141 * 0.055) / 360
24 517 = C + ((C * 141 * 0,055 ) / 360 )
24 517 = C + ((C * 7.755) / 360 )
24 517 = ((360 * C ) + (C* 7,755)) / 360
24,517 = (C * (360 + 7.755)) / 360
C = 24,517 * (360 / (360 + 7.755))
C= 24 000
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The interests
Correction - Compound interest
What is the accumulated value of a capital of €80,000 invested at compound interest at the annual rate?
at 7.45% for 5 years?
C0 amount of initial capital invested / borrowed: €80,000
N: duration of placement / loan (in years, quarters, or months): 5 years
I: interest rate for 1 € for capitalization period: 7.45%
Cinvalue acquired after N periods
Cn = Co ( 1 + I )N
Cn= 80,000 ( 1 + (7.45 / 100 ))5
Cn= 80,000 ( 1.0745 )5
Cn114,583.5
2- What is the future value of a capital of €80,000 invested at compound interest at the annual rate?
of 7.45% for 5 years and 6 months (rational solution, commercial solution)?
• Rational solution: It is considered that the investment is made at compound interest on a
whole number of periods then at simple interest on the excess fractional period.
I=CxNxT/2
= 114 583,5 x 1 * 0,0745 / 2 = 4268,2
Cn = 114,583.5 + 4,268.2 = 118,851.73
• Commercial solution: It is considered that the investment is fully made at interest.
composed and it will be enough to use the basic formula where N is a fractional number.
Cn = Co ( 1 + I )N
= 80,000 (1 + I)5.5
118,775.07
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The interests
3- How long does it take for a capital invested at a monthly compound interest rate of 0.6% to double?
is it? (monthly capitalization)
Cn = Co ( 1 + I )N
Cn = 2Co
2Co = Co ( 1 + 0.006 )N
2 = 1,006N
ln * 2 = N * ln * 1.006
N = ln * 2 / ln * 1.006 = 115.87 months
it is 9 years and 8 months
4- What quarterly interest rate must be applied to a capital of €10,000 to obtain €15,164.43 after 6
placement year? ( quarterly capitalization )
Cn = Co ( 1 + I )N
15,164.43 = 10,000 ( 1 + I )24
1.516443 = (1 + I)24
( 1,516443 )January 24= 1 + I
1.0175 = 1 + I
I = 1.75%
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The interests
Exercise 1
A capital of €100,000 is invested starting from the 1stheJanuary N at the annual rate of
10 %.
What will be its acquired value on 31/12/N+5?
b) What will be its value acquired on 30/04/N+6?
Corrected Exercise 1
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The interests
Exercise 2
Two capitals with a total of €10,000 are invested:
• compound interest at a rate of 10%
• the other at compound interest at a rate of 8%
After 9 years, they have acquired the same value.
Calculate the two capitals.
Advice
Set the problem by deciding that the first capital is x and the second is y.
knowing that the total x + y = 10,000 euros.
What will be the value acquired by x placed at 10% simple interest?
What will be the value of y placed at 8% compound interest?
Corrected Exercise 2
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Exercise 3
A company borrows €50,000 with an interest rate of 6% for a duration of 3 years.
ans.
• Establish the table of repayments by constant annuity.
• Establish the table of repayments by constant amortization.
Correction - Exercise 3
Table of repayments by constant annuity
18,705.49 Rate 6.0%
Outstanding principal in Outstanding capital in
Year Annuities Interests Depreciation
beginning of period end of period
1 50,000.00 18 705,49 3 000,00 15,705.49 34 294,51
2 34,294.51 18,705.49 2 057,67 16,647.82 17,646.69
3 17 646,69 18,705.49 1,058.80 17 646,69 0.00
56 116.47 6,116.47 50 000,00
Table of repayments by constant amortization.
Rate 6.0%
Outstanding principal in Outstanding principal in
Year Annuities Interests Depreciation
beginning of period end of period
1 50 000,00 19,666.67 3,000.00 16,666.67 33,333.33
2 33,333.33 18,666.67 2,000.00 16,666.67 16 666,67
3 16,666.67 17,666.67 1,000.00 16,666.67 -
56,000.00 6 000,00 50,000.00
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