Annual Simple Interest
𝐼𝑠 = 𝑃𝑟𝑡
where
𝐼𝑠 = simple interest
P = principal
r = rate
t = term or time, in years
Maturity (Future) Value
𝐹 = 𝑃 + 𝐼𝑠
where
𝐹 = maturity (future) value
P = principal
𝐼𝑠 = simple interest
Maturity (Future) Value
𝐹 = 𝑃(1 + 𝑟𝑡)
where
𝐹 = maturity (future) value
P = principal
𝑟 = interest
t = term/ time in years
Maturity (Future) Value and Compound Interest
𝑡
𝐹 = 𝑃(1 + 𝑟)
where
𝐹 = maturity (future) value at the end of the term
P = principal or present value
𝑟 = interest rate
t = term/ time in years
The compound interest Ic is given by,
𝐼𝑐 = 𝐹 − 𝑃
Compare the compound amounts when compounding
semi-annually and compounding annually.
NOTE:
Example 1:
Example 1:
Example 1:
Solution:
Example 2:
Example 2:
Example 2:
Solution:
Example 3:
Example 3:
Example 3:
Solution:
Example 4:
Example 4:
Example 4:
Solution:
Example 5:
Example 5:
Example 5:
Solution: