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INTEREST
I = interest
p = principal: amount you start with
r = rate of interest
t= time in years
IMPLE INTEREST
FORMULA
Principal
(Amount of
money invested
or borrowed)
If you invest $3,000 at 5% for one year, how much
will you make for the year?
I = prt
= 3000 0.05 1
= 150
You made $150 for the year.
enter in formula
as a decimal I = PRT
I = (200)(0.04)(1.5)
I = $12
Solving for Time
If you invested $300.00 in an account that paid
simple interest, find how long you’d need to
leave it in at 2% interest to make $15.00.
enter in formula
as a decimal I = PRT
15 = (300)(0.04)T
1.25 yrs = T
Maturity Value
Future Value
Amount
Calculating Maturity Value
Example
S = Principal + Interest
S= P+I
S = P + PRT
S = 200 + (200)(.04)
(1.5)
S = 200 + 12 S = $212
Calculating Maturity Value
Example
S = P(1+rt)
S=
200(1+.04•1.5) S =
200(1.06)
S = $212
Want to Be a Millionaire?
You Can!
If you leave your money to grow for a long time,
P1000 can turn into a million pesos. No, seriously.
How?
Through compounding.
COMPOUND
INTEREST
Compound Interest
Compounding interest is "interest on interest."
It is a method of calculating interest where the
interest is added to the original principal.
But also…
a. compounded annually
b. compounded semi-annually
c. compounded quarterly
d. compounded daily
At the end…