SWK 2F

Oren, Leslie Joy A. Oren

MATH01G
AC102
9th December 2020
 Please follow the proper numbering…
1. Precisely discuss each one of the 4 Variables in the formula
I= PRT that determine the amount of simple interest
Ans: I = stands for the interest on the original
investment or the interest charged for the entire period
of the loan. P= stands for principal or debt which
refers to the amount of the original investment,
borrowed, lent, or deposited. R = stands for rate of
interest which refers to the annual percentage of the
principal. Lastly, T = stands for time or duration,
which refers to the period at which money is borrowed
or deposited and it can be calculated on a year basis.
2. Differentiate Exact Interest from Ordinary Interest
Ans: Exact Interest is calculated on a 365-day year or
when computations require the use of the exact
number of days in a year,on the other hand, Ordinary
Interest is calculated on the basis of a 360-day year or
a 30-day month.
3. Discuss the concept of Maturity or Accumulated Value
Ans: Maturity or Accumulated Value is
the amount payable to an investor at the end of a debt
instrument's holding period (maturity date). It is also
 when a certain amount of money is borrowed or
deposited, it is the sum of money at the end of the
period.
4. Differentiate Simple Discount from Simple Interest Referring
to data in a legal document called promissory note:
Ans: In simple discount, the interest of the principal
value is deducted in advance, hence, the borrower will
receive the proceeds and will not be receiving the
principal value of the note. On the other hand, in
simple interest the borrower will receive the amount of
principal value from the lender, hence the borrower
must repay the amount borrowed and make extra
payments for interest earned on the principal.
5. Differentiate payer from payee.
Ans: The payer is the one who makes a payment and
the one who is borrowing money. On the other hand,
the payee is the one who lends money (lender) and the
one who is receiving the payment.
6. What does the word “Term” signify?
Ans: The word “term” signifies the duration of time to
maturity from the original date.
7. Differentiate effective rate from nominal rate
Ans: Effective rate is the real return on a savings
account or any interest-paying investment when the
effects of compounding over time are taken into
account, hence, the borrower will receive an interest
per year that is computed on the actual amount. On the
other hand, Nominal rate is the percentage increase in
money you pay the lender for the use of the money
you borrowed, and the discount rate stated in the
promissory notes.