BANK #1
Principal Amount:
Interest Rate:
Time:
300 000
15% simple interest
12 months or 1 year
SIMPLE INTEREST = 𝑃 ∗ 𝑟 ∗ 𝑡
TOTAL AMOUNT = 𝑃 ∗ (1 + 𝑟𝑡)
where:
P = Principal amount
r = Annual interest rate
t = Term of loan, in years
where:
A = Total Amount
P = Principal amount
r = Annual interest rate
t = Term of loan, in years
SIMPLE INTEREST = 𝑃 ∗ 𝑟 ∗ 𝑡
= 300,000 * 15% * 1
= 45,000
BANK #2
Principal Amount:
Interest Rate:
Time:
TOTAL AMOUNT = 𝑃 ∗ (1 + 𝑟𝑡)
= 300,000 (1 + (15%* 1) )
= 300,000 + (300,000 * .15)
= 345,000
300 000
2% interest compounded monthly
12 months
𝑟
COMPOUND INTEREST = 𝑃 ∗ (1 + )𝑡 − 𝑃
𝑘
where:
P = Principal amount
r = Annual interest rate
k = compounding times a year
t = Number of times interest is compounded
𝑟
𝑟
COMP. INT = 𝑃 ∗ (1 + 𝑘)𝑡 − 𝑃
= 300,000 ∗ (1 +
2% 12
)
12
𝑟
TOTAL AMOUNT = 𝑃 ∗ (1 + )𝑡
𝑘
where:
A = Total Amount
P = Principal amount
k = compounding times a year
r = Annual interest rate
t = Number of times interest is compounded
TOTAL AMOUNT = 𝑃 ∗ (1 + 𝑘)𝑡
− 300,000
= 300,000 ∗ 1.020184356 − 300,000
= 6,055.31
= 300,000 ∗ (1 +
2% 12
)
12
= 300,000 * 1.020184356
= 306,055.31
BANK #3
Principal Amount:
Interest Rate:
Time:
300 000
4% interest compounded quarterly
12 months
COMPOUND INTEREST = 𝑃 ∗ (1 + 𝑟)𝑡 − 𝑃
where:
P = Principal amount
r = Annual interest rate
t = Number of years interest is applied
TOTAL AMOUNT = 𝑃 ∗ (1 + 𝑟)𝑡
where:
A = Total Amount
P = Principal amount
r = Annual interest rate
t = Number of years interest is applied
COMP. INT = 𝑃 ∗ (1 + 𝑟)𝑡 − 𝑃
= 300,000 ∗ (1 + 4%)1 − 300,000
= 300,000 𝑥 1.04 − 300,000
= 12,000
TOTAL AMOUNT = 𝑃 ∗ (1 + 𝑟)𝑡
= 300,000 ∗ (1 + 4%)1
= 300,000 * 1.04
= 312,000
BANK #3
Principal Amount:
Interest Rate:
Time:
300 000
4% interest compounded quarterly
12 months
𝑟
COMPOUND INTEREST = 𝑃 ∗ (1 + 𝑘)𝑡 − 𝑃
where:
P = Principal amount
r = Annual interest rate
k = compounding times a year
t = Number of times interest is compounded
𝑟
𝑟
COMP. INT = 𝑃 ∗ (1 + 𝑘)𝑡 − 𝑃
= 300,000 ∗ (1 +
4% 4
)
4
𝑟
TOTAL AMOUNT = 𝑃 ∗ (1 + 𝑘)𝑡
where:
A = Total Amount
P = Principal amount
k = compounding times a year
r = Annual interest rate
t = Number of times interest is compounded
TOTAL AMOUNT = 𝑃 ∗ (1 + 𝑘)𝑡
− 300,000
= 300,000 ∗ 1.04060401 − 300,000
= 12,181.20
= 300,000 ∗ (1 +
4% 4
)
4
= 300,000 * 1.04060401
= 312,181.20