What I have learned

in Chapter 1
England D. Esclamado
Math 13
 Exact Time
• Simple Interest It uses the precise number of days for time
of the loan or investment.
• Compound interest Approximate time
• I = Prt Assumes that each month has 30 days
• I = Simple interest
• r = interest rate
• t = length of time or length of term
• Time Calculation For
(Measured in year) Actual time
• F=P+I
• F = P + Prt 31 days 30 days 28 days
• F = P(1+rt) January April February
(29 days in a leap year
• Ordinary Interest which is every 4 years)
• Exact Interest March June • Leap year
• Ordinary (t = D/360) May September Calculation
• I = P x r x (D/360) July November Ex. 2000, then Divide
by 400
August Ex. 2016, then divide by
• Exact (t = D/360)
• I = P x r x (D/365) October 4 only
December
 (Banker’s rule)
Ordinary/actual Interest Exact/actual Interest
• P = $15,000 • P = $15,000
• r = 0.06 • r = 0.06
• t = 72 days/360 • t = 72 days/365
• I = $15,000*(0.06)*(72 days/360)
• I = $180 • I = $15,000*(0.06)*(72 days/365)
• I = $177.53

Ordinary/aprxm Interest Exact/aprxm Interest

• P = $15,000 • P = $15,000
• r = 0.06 • r = 0.06
• t = 70 days/360 • t = 70 days/365
• I = $15,000*(0.06)*(70 days/360) • I = $15,000*(0.06)*(70 days/365)
• I = $175 • I = $172.60
NOTE:

Accumulation and discounting

• To ACCUMULATE is to find the amount, F
• To DISCOUNT is to find the present value, P
 Discount Interest

• Id= Fdt
• F = Face Value
• d = annual rate of discount rate
• t = length of time or length of term
(Measured in year)

• Proceeds = F(1 – dt)

Promissory note
Types of promissory note
Interest-bearing note
Interest is accrued in accordance with the terms of
the agreement.
Non-Interest-bearing note
A note or bond with no stated interest rate on its face

Formula to take note.

Maturity Value
MV = F
MV = P(1+rt)

Steps in discounting interest-bearing promissory notes.

1.) Calculate the interest and maturity value
2.) Calculate the discount period.
3.) Calculate the bank discount
4.) Calculate the proceeds.
Steps in discounting interest-bearing promissory notes.
1.) Calculate the interest and maturity value
2.) Calculate the discount period.
3.) Calculate the bank discount
4.) Calculate the proceeds.