Excel & Business Math Simple Interest

Excel & Business M
Simple Interest & Short
Topics:
1) Debt
2) Interest
3) Simple Interest Formulas
4) 14 Examples
5) 10 Homework Problems
& Business Math 42
erest & Short Term Loans
What is Debt? What is Interest?
"Owe Money" or "Loan" "Rent on Money"
Synonyms: Contractual fee charged to borrow money
Debt = Loan = Liability = Owe Money If you are the borrower you pay interest to the lender
Example: If you are the lender you get interest from the borrower
You borrow $100 from Bank Example of Borrower:
The Bank Lends you $100 The Bank Lends you $100
This means you owe $100 to the Bank In 1 year you pay back $110
In this video the Debt we look at is: You Pay Interest on Debt of = 110 - 100 = $10
Short Term Loans (usually 1 year or less) Example of Lender:
The Bank Lends you $100
In 1 year you pay back $110
Bank Earns Interest on Investment = 110 - 100 = $10
rest to the lender
t from the borrower
110 - 100 = $10

Loan Terms
Principal: Payee or Creditor or Lender:
Loan Amount = Amount borrowed, lent out, or invested The person lending the money
From the borrower's point of view it is DEBT Term:
From the lender's point of view it is an INVESTMENT Length of time until the loan is due -
Interest: Issue Date:
Contractual fee charged to borrow money Day Loan is made
Simple Interest: Maturity Date:
Interest paid on only the principal The Date that the Principal and Inter
Usually used for loans lasting less than 1 year Maturity Value:
Compound Interest: Total Amount to pay on Maturity Da
Interest paid on principal and past interest also known as "interest on interest" Promissory Notes:
Usually used for loans lasting more than 1 year A legal document in which a person o
Interest Rate: 1) A stated amount of money
% of Principal that Borrower Must Pay as Interest 2) Plus interest computed at a sta
Maker or Payer or Debtor or Borrower: 3) At a stated time in the future
The person borrowing the money
Promissory Notes
Borrower: Sioux Radcoolinator Issue Date: 31/03/

Lender: BECU Bank Maturity Date: 31/03/
Principal: $100.00
Annual Simple Interest Rate: 10.00%
Term: 12 Months
Signature S ioux Radcoolinator

Example 01:
Creditor or Lender:
rson lending the money Borrower
Lender
of time until the loan is due - given in days, months or years P = Principal Amount Borrowed =
R = Annual Simple Interest Rate =
Term Unit
Term = Length of Loan
te that the Principal and Interest is Due T = Time (Fraction of a Year) =
I = Simple Interest $ = P*R*T
mount to pay on Maturity Date = Principal + Interest Maturity Value =
Issue Date =
document in which a person or firm agrees to pay to another: Maturity Date =
stated amount of money
lus interest computed at a stated rate
t a stated time in the future
Issue Date: 31/03/2017

Maturity Date: 31/03/2018
nator
Sioux Radcoolinator
BECU Bank
$100.00
10.00%
Months
12 Months
1 =R8/12
$10.00 =R5*R6*R9
$110.00 =R5+R10
3/31/2017
3/31/2018 =EDATE(R12,R8)
Promissory Notes
Borrower: Sioux Radcoolinator Issue Date: 3/31/2017

Lender: BECU Bank Maturity Date: 3/31/2018
Principal: $100.00
Annual Simple Interest Rate: 10.00%
Term: 12 Months
Signature Sioux Radcoolinator

Simple Interest Rate:
Anuual Simple Interest Rate paid or received
Simple Interest Formula:

Simple Interest = Principal * Rate * Time
I=P*R*T
I = $ Amount of Simple Interest
P = Principal = $ Amount of Loan
R = Rate is the Annual Simple Interest Rate
T = Time is the Length of the Loan in Years (fraction of 1 year)
For some loans Time is given in months, so you must convert
For some loans Time is given in days, so you must convert
Simple Interest $ Amount = Principal * Simple Annual Interest Rate * Time (Fraction of Year)
Time Convert Formulas (To Calculate Fraction of 1 Year):

Time Given In Months:
T (Fraction of 1 Year) = (Number of Months in Loan Period)/12
Time Given In Days:
Exact Interest:
T (Fraction of 1 Year) = (Number of Days in Loan Period)/365 **366 if leap year
Banker's (Ordinary) Interest:
T (Fraction of 1 Year) = (Number of Days in Loan Period)/360
**Banker's Interest Yeilds More Interest Than Exact Interest Because the Denominator is smaller
Example 02:
Principal $100.00
Simple Annual Interest Rate 10.00%
Time (Fraction of Year) 1
Simple Interest $ Amount
Example 03:
Principal $100.00
Time (Fraction of Year) 0.5
Example 04:
Principal $100.00
Example 02:
Principal $100.00
Time (Fraction of Year) 1
Simple Interest $ Amount $10.00 =ROUND(B4*B5*B6,2)
Example 03:
Principal $100.00
Example 04:
Principal $100.00
Example 05:
If you borrow ₱4,500.00 at an Annual Simple Interest Rate of 6.50% for a 9 month term,
what is the maturity value and what is the maturity date?
Principal $4,500.00 P
Annual Simple Interest Rate 6.50% R
Time (in Months) 9 months
Loan Issue Date 11/21/2017
Formula I=P*R*T
Time (in Years) T =Months/12
Interest I =ROUND(P*R*T,2)
Maturity Value M =P + I
Loan Maturity Date =EDATE(Loan Issue Date,Time (
For Months use EDATE Function. EDATE function tells you a
date a given number of months in the future.
Example 06:
If you borrow ₱150,000.00 at an Annual Simple Interest Rate of 6.75% for a 180 day term,
what is the interest paid for both the exact and banker's interest methods? What is Maturity Date?
Time (in Days) 180 days
Exact Interest
Fraction of Year T Days/365
Interest I =ROUND(P * R * T,2)
Ordinary or Banker's Interest
Interest I =ROUND(P * R * T,2)
Maturity Date
Example 07:
Interest I =ROUND(P*R*Months/12,2)
Maturity Value M =P + I
Loan Maturity Date =EDATE(Loan Issue Date,Time (
Example 08:
If you borrow ₱18,500.00 at an Annual Simple Interest Rate of 7.00% on 9/14/2017 and pay the loan back on 1/12/2018,
what is the maturity value and what was the term of the loan (interest calculated using Exact Method)?
Maturity Date 1/12/2018
Number Of Days in Term =Maturity Date - Loan Issue Date
Interest =ROUND(P*R*Months/12,2)
Maturity Value =P + I
ROUND(P*R*T,2)
EDATE(Loan Issue Date,Time (in Months))

EDATE function tells you a
ROUND(P * R * T,2)
ROUND(P * R * T,2) The longer the time, the more the interest
ROUND(P*R*Months/12,2)

loan back on 1/12/2018,
ate - Loan Issue Date

R*Months/12,2)
Example 05:
Formula I=P*R*T
Time (in Years) 0.75 T =B30/12 =Months/12
Interest $219.38 I =ROUND(B28*B29*B33,2) =ROUND(P*R*T,2)
Maturity Value $4,719.38 M =B28+B34 =P + I
Loan Maturity Date 8/21/2018 =EDATE(B31,B30) =EDATE(Loan Issue Date,Time
Example 06:
what is the interest paid for both the exact and banker's interest methods? What is Maturity Date?
Exact Interest
Fraction of Year 0.49315068493 T =B46/365 Days/365
Interest $4,993.15 I =ROUND(B44*B45*B49,2) =ROUND(P * R * T,2)
Ordinary or Banker's Interest
Fraction of Year 0.5 T =B46/360 Days/360
Interest $5,062.50 I =ROUND(B44*B45*B52,2) =ROUND(P * R * T,2)
Maturity Date 1/7/2019 =B47+B46
Example 07:
Interest $1,079.17 I =ROUND(B60*B61*B62/12,2) =ROUND(P*R*Months/12,2)
Maturity Value $19,579.17 M =B60+B64 =P + I
Loan Maturity Date 7/14/2021 =EDATE(B63,B62) =EDATE(Loan Issue Date,Time
Example 08:
Number Of Days in Term 120 =B77-B76 =Maturity Date - Loan Issue Date
Interest $425.75 =ROUND(B74*B75*B78
=ROUND(P*R*Months/12,2)
Maturity Value $18,925.75 =B74+B79 =P + I
ROUND(P*R*T,2)

ROUND(P * R * T,2)
ROUND(P * R * T,2) The longer the time, the more the interest
ROUND(P*R*Months/12,2)

an back on 1/12/2018,
ate - Loan Issue Date

R*Months/12,2)
Solve For Principal
Example 09:
If you paid ₱225.00 in interest, the term of the loan was 90 Days,
and the Annual Simple Interest Rate was 8.75%,
what was the original borrowed amount (Principal)? Use Exact Method.
Term 90 days
Days In Year 365
Simple Interest Paid $225.00 I
Principal P =I/(R*T)
Principal Rounded =ROUND(I/(R*T),2)
Check I: =P*R*T
Example 10:
If you paid ₱110.00 in interest, the term of the loan was 4 Months,
what was the original borrowed amount (Principal)?
Term 4 Months
Fraction of Year T Months/12
Principal P =(I/(R*T)
Check I:
Solve For Rate

Example 11:
If you borrow ₱50,000.00 for 4 months and pay ₱1,000.00 in Simple Interest,
what is the Annual Simple Interest Rate?
Term 4 months
Simple Interest Paid $1,000.00 I
Annual Simple Interest Rate R =I/(P*T)
Check I: =P * R * T
Example 12:
If you borrow ₱2,500.00, pay simple interest of ₱10.00,
have an issue date of 11/22/2021 and a maturity date of 12/12/2021,
what was the simple interest rate?
Issue Date 11/22/2021
Maturity Date (Due Date) 12/12/2021
Days =Due Date - Issue Date
Days In Year 365
Fraction of Year T =Days/365
Annual Simple Interest Rate R =I/(P*T)
Check I: =ROUND(P * R * T,2)
Solve For Time

Example 13:
If you borrowed ₱1,450.00 at a Annual Simple Interest Rate of 4.50% and the
Simple Interest Paid was ₱50.00, what was the term of the loan in Days?
Use Exact Method.
Days In Year 365
Time (Fraction of Year) T =I/(P*R)
Days (Exact Method) Days =ROUND(I/(P*R)*365,0) --- Round
Check I: =P * R * T
Example 14:
Simple Interest Paid was ₱160.00, what was the term of the loan in Months?
Annual Simple Interest Rate 8% R
Time (Fraction of Year) T =I/(P*R)
Months Months =ROUND(I/(P*R)*12,0) --- Round
Check I: =ROUND(P * R * T,2)

UND(I/(R*T),2)
UND(I/(R*T),2)
Date - Issue Date
UND(P * R * T,2)
UND(I/(P*R)*365,0) --- Round to the ones postion because we are talking about whole days
UND(I/(P*R)*12,0) --- Round to the ones postion because we are talking about whole months
UND(P * R * T,2)
Solve For Principal
Example 09:
Term 90 days
Days In Year 365
Fraction of Year 0.24657534247 T =B35/B36 Days/365
Principal 10428.5714286 P =B37/(B34*B38) =I/(R*T)
Principal Rounded $10,428.57 =ROUND(B39,2) =ROUND(I/(R*T),2)
Check I: $225.00 =B39*B34*B38 =P*R*T
Example 10:
Term 4 Months
Fraction of Year 0.33333333333 T =B48/12 Months/12
Principal 6285.71428571 P =B49/(B47*B50) =(I/(R*T)
Principal Rounded $6,285.71 =ROUND(B51,2) =ROUND(I/(R*T),2)
Check I: 110 =B51*B47*B50
Solve For Rate

Example 11:
Term 4 months
Annual Simple Interest Rate 0.06 R =B66/(B64*B67) =I/(P*T)
Check I: $1,000.00 =B64*B68*B67 =P * R * T
Example 12:
If you borrow ₱2,500.00, pay simple interest of ₱10.00,
Days 20 =B80-B79 =Due Date - Issue Date
Days In Year 365
Fraction of Year 0.05479452055 T =B81/B82 =Days/365
Check I: $10.00 =B77*B84*B83 =ROUND(P * R * T,2)
Solve For Time

Example 13:
Use Exact Method.
Days In Year 365
Time (Fraction of Year) 0.7662835249 T =B98/(B96*B97) =I/(P*R)
Days (Exact Method) 280 Days =ROUND(B100*B99,0) =ROUND(I/(P*R)*365,0) --- Round
Check I: $50.00 =B96*B97*B100 =P * R * T
Example 14:
Simple Interest Paid was ₱160.00, what was the term of the loan in Months?
Months 5 Months =ROUND(B112*12,0) =ROUND(I/(P*R)*12,0) --- Round
Check I: $160.00 =B109*B110*B112 =ROUND(P * R * T,2)

UND(I/(R*T),2)
UND(I/(R*T),2)
Date - Issue Date
UND(P * R * T,2)
UND(P * R * T,2)
HW 01:
If you borrow $50,000.00 at an Annual Simple Interest Rate of 7.50% for a 6 month term,
Principal $50,000.00
Annual Simple Interest Rate 7.50%
HW 02:
If you borrow $10,450.00 at an Annual Simple Interest Rate of 6.50% for a 2 month term,
HW 03:
If you borrow $25,000.00 at an Annual Simple Interest Rate of 5.00% on 1/1/2020 and pay the loan back on 9/2/2020,
HW 04:
If you borrow $150,000.00 at an Annual Simple Interest Rate of 8.00% for a 120 day term,
what is the maturity value and what is the maturity date? Use Exact Method.
Days in Year 365
ack on 9/2/2020,
HW 01:
Formula I=P*R*T
Time (in Years) T
Interest I
Maturity Value M
Loan Maturity Date
HW 02:
Interest I
Maturity Value M
Loan Maturity Date
HW 03:
Number Of Days in Term 245 =B39-B38 =Maturity Date - Loan
Interest $839.04 =ROUND(B36*B37*B40/365,2) =ROUND(P*R*Months
Maturity Value $25,839.04 =B36+B41 =P + I
HW 04:
what is the maturity value and what is the maturity date? Use Exact Method.
Formula I=P*R*T
Days in Year 365
Time (in Years) 0.32876712329 T =B51/B54
Interest $3,945.21 I =ROUND(B49*B50*B55,2)
Maturity Value $153,945.21 M =B49+B56
Loan Maturity Date 6/6/2018 =B52+B51
=Months/12
=ROUND(P*R*T,2)
=P + I
=EDATE(Loan Issue Date,Time (in Months))
=P + I
ack on 9/2/2020,
=Maturity Date - Loan Issue Date

=Months/12
=ROUND(P*R*T,2)
=P + I
HW 05:
If you paid $500.00 in interest, the term of the loan was 120 Days,
HW 06:
If you paid $500.00 in interest, the term of the loan was 6 Months,
HW 07:
If you borrow $125,000.00 for 1 month and pay $1,250.00 in Simple Interest,
HW 08:
If you borrow $55,000.00, pay simple interest of $1,446.58,
what was the simple interest rate? Use Exact Method.
HW 09:
If you borrowed $5,000.00 at a Annual Simple Interest Rate of 5.00% and the
Simple Interest Paid was $200.00, what was the term of the loan in Days?
Use Exact Method.
HW 10:
If you borrowed $500,000.00 at a Annual Simple Interest Rate of 10.00% and the
Simple Interest Paid was $4,166.67, what was the term of the loan in Months?
HW 05:
Term 120 days
Days In Year 365
Principal P =I/(R*T)
Check I: =P*R*T
HW 06:
Term 6 Months
Principal P =(I/(R*T)
Check I:
HW 07:
Term 1 months
Check I: $1,250.00 =B32*B36*B35 =P * R * T
HW 08:
If you borrow ₱55,000.00, pay simple interest of ₱1,446.58,
Days 120 =B48-B47 =Due Date - Issue Date
Days In Year 365
Fraction of Year 0.32876712329 T =B49/B50 =Days/365
Check I: $1,446.58 =B45*B52*B51 =ROUND(P * R * T,2)
HW 09:
Use Exact Method.
Days In Year 365
Days (Exact Method) 292 Days =ROUND(B66*B65,0) =ROUND(I/(P*R)*365,0) --- Rou
Check I: $200.00 =B62*B63*B66 =P * R * T
HW 10:
Simple Interest Paid was ₱4,166.67, what was the term of the loan in Months?
Months 1 Months =ROUND(B78*12,0) =ROUND(I/(P*R)*12,0) --- Roun
Check I: 4166.67 =ROUND(B75*B76*B78,2) =ROUND(P * R * T,2)

UND(I/(R*T),2)
UND(I/(R*T),2)
Date - Issue Date
UND(P * R * T,2)
UND(P * R * T,2)

Excel & Business Math Simple Interest

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Simple Interest & Short

110 - 100 = $10

Borrower: Sioux Radcoolinator Issue Date: 31/03/

Signature S ioux Radcoolinator

Issue Date: 31/03/2017

Borrower: Sioux Radcoolinator Issue Date: 3/31/2017

Signature Sioux Radcoolinator

Simple Interest Formula:

Time Convert Formulas (To Calculate Fraction of 1 Year):

EDATE(Loan Issue Date,Time (in Months))

EDATE(Loan Issue Date,Time (in Months))

loan back on 1/12/2018,

ate - Loan Issue Date

EDATE(Loan Issue Date,Time (in Months))

EDATE(Loan Issue Date,Time (in Months))

ate - Loan Issue Date

Solve For Rate

Check I: =ROUND(P * R * T,2)

Solve For Time

Check I: =ROUND(P * R * T,2)

Date - Issue Date

Check I: 110 =B51*B47*B50

Solve For Rate

Check I: $1,000.00 =B64*B68*B67 =P * R * T

Check I: $10.00 =B77*B84*B83 =ROUND(P * R * T,2)

Solve For Time

Check I: $160.00 =B109*B110*B112 =ROUND(P * R * T,2)

Date - Issue Date

=Maturity Date - Loan Issue Date

Check I: $1,250.00 =B32*B36*B35 =P * R * T

Check I: $1,446.58 =B45*B52*B51 =ROUND(P * R * T,2)

Check I: 4166.67 =ROUND(B75*B76*B78,2) =ROUND(P * R * T,2)

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Check I: 110 =B51B47B50

Check I: $1,000.00 =B64B68B67 =P * R * T

Check I: $10.00 =B77B84B83 =ROUND(P * R * T,2)

Check I: $160.00 =B109B110B112 =ROUND(P * R * T,2)

Check I: $1,250.00 =B32B36B35 =P * R * T

Check I: $1,446.58 =B45B52B51 =ROUND(P * R * T,2)

Check I: 4166.67 =ROUND(B75B76B78,2) =ROUND(P * R * T,2)