Interest Rate

Intoduction

CONTENTS What do you know

about Interest Rates?

When Interst Rate

applied?
Understanding
Simple Interest and
Formula
 01
Introduction
 -Is a term that you hear when working with
money.
-Most of the time Interest hear in
banking.
Interest Rate Title text
-is addition
the price you pay to borrow money.
-When you borrow money, you generally must
pay back the original amount you borrowed,
plus a certain percentage of the loan amount as
interest.
 -is normally expressed as a percentage and is normally
used to show what either has to be paid to borrow
money or lend money.

-by borrowing/lending the principal amount(the loan

Simple Interest
amount) you would normally expect to receive
something in return or pay something because of this
loan.

-this is normally expressed as a percentage.

 02
What do you know about
Interest Rates?
 What do you know about Inetrest Rate?

As Interest Rates is defined as the proportion of an amount loaned which the

lender is charges as interest to the borrower, normally expressed as an amount
percentage. It is the amount of money that is paid or earned based on using
money whether it's loaned, borrowed, or invested. It is the rate a bank or other
lender charges to borrow its money or the rate a bank pays its savers for keeping
money in an account.
 Simple interest represents a fee you pay on a loan or income you
earn on deposits.

When borrowing money:

You must repay the amount you borrowed and make extra payments
for interest, which represents the cost of borrowing.
When lending money:

You typically set a rate and earn interest income in exchange for
making your money available to other people.

When depositing money:

Interest-hearing account such as savings accounts pay interest income

because you are making money available to the bank to lend to others.
 03
When Interest Rates Applied?
 When Interest Rates applied?

When you put money into a savings account, then the bank calculates
how much money Interest Rate apply to most leading or borrowing
transactions. Individual borrow money to purchase home fund
project.
 04
Understanding Simple
Interest and Formula
Understanding Simple Interest and formula

Interest?

Simple? Simple
Interest?
 Simple Interest
-Is a quick and easy method od calculating the interest charge on a loan.
Simple interest is determined by multiplying the daily interest rate by
the principal by the number of days that elapse between payments.
-this type of interest usually applies to automobile loans or short-term
loans, although some mortages use this calculation method. When you
make a payment on a simple interest loan, the payment first goes toward
that month's interest, and the remainder goes toward the principal.
 The formula for Simple Interest is:

Simple Interest formula

A=P (1 + rt)
A = Final amount r = Annual interest rate

P = Initial principal balance t = Time ( in years)

 Simple interest example

Say you take out an installment loan to pay for a new washing machine
which a principal balance of $800 and a 5% annual simple interest rate
to be paid over a period of three years.
• The amount of Simple interest paid would be calculated by
multiplying the interest rate by the principal payment, then by the
number of years:

$800 × .05 × 3 = $120

• The Total amount paid is found by adding the simple interest to the
principal amount:

$120 + $800 = $920

• As you can see, you can use simple interest to figure out
roughly how much you'll pay for borrowing money. In this case,
the principal balance of $800 becomes $920 over three years.
Generalization:
When it comes to basics of finance you have to learn about simple interest!
Simple interest will affect your loans and investments and understanding this
concept will make you money or lose you money.

• Simple interest is calculated by multiplying the daily interest rate by the

principal, by the number of days that elpase between payments.

• Simple interest benefits consumers who pay their loans on time or early
each month.
• Auto loans and short-term personal loans are usually simple interest loans .
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