Simple Interest

1. If 20,000 is invested at 6% simple interest for 4 years. Find the simple interest.

Given: Required: I Solution:

P= 20,000 I= Prt

r= 6% I= ( 20,000) (.o6) (4)

t= 4 years
I= 4,800

2. If the simple interest is 6,500 with the rate of 9% for 6 years. Find the principal.

Given: 6,500
P=
(.09)(6)
I= 6,500
P= 12,037.04
r= 9%

t= 6 years

Solution:

Required: P
P=

Time

Ordinary Interest ( )

1. If 20,000 is invested at 10% simple interest for 140 days. Find ordinary interest.

Given: Required: Solution:

P= 20,000 = Prt
= 777.78
r= 10% 140
= ( 20,000) (.10) ( )
360
t= 140 days

2. If 15,000 is invested at 9% simple interest for 60 days. Find ordinary interest.

Given: 60
= ( 15,000) (.09) (360)
P= 15,000
= 225
r= 9%

60 Solution:
t=
360
= Prt
Required:

Exact Interest ( )
1. If 50,000 is invested at 2% simple interest for 20 days. Find exact interest.

Given: Required:

P= 50,000 Solution:
= 54.79
r= 2% =Prt
20 20
t= = (50,000) (.02) ( )
365 365

2. . If 25,000 is invested at 5% simple interest for 40 days. Find exact interest.

Given: 40
= ( 25,000) (.05) (365)
P= 25,000

r= 5% = 136.99
40 Solution:
t=
365
=Prt
Required:

Time Between Two Dates

1. Calculate the actual and the approximate time.

a. March 16, 2013- November 27, 2013

b. August 13, 2013- December 26, 2013

 a. Actual Time Approximate Time

March 16 15 14
April 30 30
May 31 30
June 30 30
July 31 30
August 31 30
September 30 30
October 31 30
November 27 27 27
Total: 256 Days 251 Days

b. Actual Time Approximate Time

August 13 18 17
September 30 30
October 31 30
November 30 30
December 26 26 26
Total: 135 Days 133 Days

2. Calculate the actual and the approximate time.

a. September 12, 2013- December 16, 2013

b. April 2, 2013- June 26, 2013

a. Actual Time Approximate Time

September 12 18 18
October 30 30
November 31 30
 December 16 16 16
Total: 95 Days 94 Days

b. Actual Time Approximate Time

April 2 28 28
May 31 30
June 26 26 26
Total: 85 Days 84 Days

Four Kinds of Interest

1. Find the four kinds of interest using the given below.

Given:

P = 10,000, r = 8% or 0.08 and t = Sept 18, 2010 - Feb 2, 2011

Required & Solution:

a. ( ) Actual Time = Prt = ( 10,000)(0.08)(137/360)

= 304.44

b. ( ) Actual Time = Prt = ( 10,000)(0.08)(137/365)

= 300.77

c. ( ) Approximate Time = Prt = ( 10,000)(0.08)(134/360)

= 297.78

d. ( ) Approximate Time = Prt = ( 10,000)(0.08)(134/365)

 = 293.70

Actual Time Approximate Time

September 18 12 12
October 31 30
November 30 30
December 31 30
January 31 30
February 2 2 2
Total: 137 Days 134 Days

Ordinary Interest using 6% method

1. Find the ordinary simple interest using the given below.

Given: Required: ( ) Using 6% method

P = 10,000, r = 7% or 0.07 and t = 78 days

= 100
Solutions:

1. 78 = 60 + 15 + 3 ( ) = (0.001)P(1/2)

= 1(60) + 1/4(15) + 1/2(6) =(0.001)( 10,000)(1/2)

2. ( ) = (0.1)P

= (0.1)( 10,000)
= 5
3. ( ) = using 6% method for
78 days

= + +
( ) = (0.01)P(1/4)
= 100 + 25 + 5
=(0.01)( 10,000)(1/4)

= 25
 = 130 + 130/6
= 130
4. using 6% method for 78 days at 7%

= 6% + /6 = 6% + 7%

= 151.67

Accumulation and Discount at Simple Interest

1. Accumulate.

Given:

P = 10,000, r = 7% or 0.07 and t = 5 years

Required: F

Solution:

F = P (1 + rt)

F = 10,000 (1 + (0.7)5)

F = 10,000 (1.35)

F = 13, 500

2. Discount.

Given:

P = 10,000, r = 5% or 0.05 and t = 5 years

Required: P

Solution:

P=
(1+)

P = 10,000/(1 + (0.05) (5)

 P = 8,000

Simple Discount (I)

1. Given: Required: I

F = 10,000, Solution:

d = 7% or 0.07 I= Fdt

t = 5 years I= ( 10,000) (.07) (5)

I = 3,500

2. Given:

F = 50,000,

d = 10% or 0.1

t = 10 months

Required: I&P

Solution:

a. I = Fdt

= (50,000) (0.10) (10/12)

I = 4,166.67

b. P = F - I

= 50,000 - 4166.67

P = 45,833.33
Equivalent Rates

1. Find the interest rate equivalent.

Given:

d = 10% or 0.10 and t = 5 years, r = ?

Solution:

r=
(1)

= .10/(1 - (.10) (5)

= .10/.5

r = 20%

2. Find the interest rate equivalent.

Given:

r = 15% or 0.15 and t = 3 years, d = ?

Solution:

d=
(1+)

= .15/(1 + (.15) (3)

= .15/1.45

d = 10.34%

Discounting Promissory Notes

1. Given: Date of the note = March (3 months after March 12 is (36)

days.)
Fv = 12,000

d = 6 1/2%

t = 3 months
Discount date = May 7 = 12,000 (1 - (0.065) 36/360)

Required: P P = 11,922 = 12,000 (1 -

(0.065) 1/10)
Solutions:
= 12,000 (1 - 0.0065)
a. P = FA (1 -dtd)

2. Given:

Date of note = September 1 (60 days after Sept 1 is 15 days)

Discount date = October 16 Solutions:

Fr = 27,000 FA = Fv (1+ rtn)

d = 6% = 27,000 (1 + (0.05)1/6)

r = 5% = 27,000 (1.00833)

tn = 60 days
FA = 27,224.91
Required: P

P = FA (1 -dtd)

= 27,224.91(1 - (0.06) 15/360)

= 27,224.91(0.9975)

P = 27,156.84

3.Given: Required: Fv
Fv = 14,516.83
d = 8% Solution:

P = 14,420
Fv =
(1)

td = 30 days
= 14,420/(1-(0.08)30/360)

= 14,420/.99333

Maturity Date

1. Find the Maturity Date and the term of discount of a 120 note dated June 25 and discounted on August 9.
 = 120 days after June 25 is October 23, from Aug 19 - Oct 23 is 65 days.

2. Find the bank and the proceeds on a note for 36,000 dated April 4 and due 5 months later with interest at 8% discount
on July 6 at 9%. = July 6 - Sept 4 is 60 days.

Given: = 36,000 (1 + 0.333)

Fv = 36,000
FA = 37,199.88
r = 8% P = FA (1 -dtd)

d = 9% = 37,199.88
(1 - P = 36,641.88 (0.09) 60/360)
Required: I & P

Solution:

FA = Fv (1+ rtn)
I=F-P
= 36,000 (1 + (8%)5/12)
= 37,199.88- 36,641.88

I = 558
1. Find the bank discount and the proceeds.

= October 30 - November 15 is 45 days.

Given: Required: I and P

P = 47,520
Fv = 48,000 I = FA dtd

d = 9% I = 480 = 48,000 (1 +
(8%)45/360)
td = 45 days

Date of note = November 15

P = FA - I
Discount date = October 1
= 48,000 - 480

2. Find the discount rate. Required: I & d

Given: Solution:

P = 29,825 I = FA - P

FA = Fv = 30,000 I = 175

td = 42 days
 = 175/3500
d=
()

= 75/(30,000)(42,360)
d = 0.05 or 5%

Accumulation and Discount at Compound Interest

1. Accumulate 10,000 at 9% compounded quarterly for 3 years at 6 months (by log)

Solution:

i = r/m = (3 years and 6 months)(4)

= .09/4 = (3 1/2)(14) = (7/2)(4)

n= 14

i = 0.0225

F = P (1 + i)n

= 10,000 (1.0225)14

F = 13, 654.83
n = tm

2. Accumulate 50,000 using log at 7 1/2% compounded semi-annually for 3 years and 9 months.

Given:

= 50,000

i = 0.0375

n = 7.5

F = P (1 + i)n
 = 50,000 (0.0375)7.5

F = 65,899.30

Laws of Logarithm

Multiplication: MN = antilog [logM + logN]

a. x = (25.65)(3.35)

log x = log25.65 + log3.35

log x = 1.409087 + 0.525045

log x = 1.934132

x = antilog 1.934132

x = 85.9275

b. x = (5.7535)(253.4)(0.367)

log x = log5.7535+ log253.4 + log0.367

log x = 0.759932 + 2.403807 + (-0.435334)

log x = 2.728405

x = 535.06

Division: M/N = antilog [logM - logN]

x = 375.35/28.78

log x = log375.35 - log28.78

log x = 2.574436 - 1.459091

x = antilog 1.115345

x = 13.04
Mn = antilog[NlogM]
a. x = 23

x = antilog[3log2]

x = antilog [3(0.301030)]

x=8

b. x = (2.55)8

x = antilog[8log2.55]

x = antilog[8(0.406540)]

x = antilog 3.252321

x = 1787.81

M N/P = antilog [N/PlogM]

a. x = 163/2 = (16)3 = 64 b. 125 = x3

x = antilog [3/2log16] log125 = 3logx

x = 64 3logx = log 125

5x = 125 log x = log125/3

xlog5 = log125 log x = 2.09691/3

x = log 125/log5 log x = 0.69897

x = 2.09691/0.698970 x = antilog 0.69897

x=3 x=5

c. 5x = 25

5x = log 25

x log 5 = log 25

x = log 25/log 5

x = 1.397940/0.698970
 x=2

d. x2 = 25

2 log x = log 25

log x = log 25/2

log x = 1.397940/2

x = antilog 0.698970

x=5

e. x = 52

log x = 2 log 5

= 2(0.698970)

log x = 1.397940

x = antilog 1.397940

x = 25

Compound Interest

1. I=F-P

I = Compound Interest

F = Final amount/ value

P = Principal/ money invested

2. F = P (1 + i)n P = Principal, i = interest rate

i = n/m n = interest rate per conversion, m = no. of conversion per year

*Conversion in a year(m):

1. Converted monthly = m = 12
 2. Converted semi - annually = m = 2

3. Quarterly = m = 4

4. Annually = m = 1

*Total number of Conversion

1. rate is converted monthly for 2 years

n = tm

n = 2(12) = 24

2. rate is converted quarterly for 3 year and 6 months

n = tm

n = (3 1/2 or 7/2)(4)

n = 14

3. rate is converted semi-annually for 5 years and 4 months

n = tm

n = (16/3)(2)

n = 32/3 or 10 2/3

1. Find the compound amount and compound interest if 10,000 is invested at 9% converted quarterly for 3 years and 6
months.

Given: i = r/m = .09/4

F = 13,654.83
P = 10,000
i = 0.0225
r = 9%

m=4

t = 7/2

Required: F and I

Solution:
 F = 10,000 (1.365483)

n = tm

n = (3 1/2 or 7/2)(4)

I = F -P

n = 14
= 13,654.83 - 10,000

F = P(1 + i)n
I = 3,654.83
= [ 10,000(1 + 0.0225)]14

2. Given:

P = 50,000

r = 8 3/4%

m=2

t = 5 years and 9 months (5 3/4 or 23/4)

Solution:

i = r/m = (.35/4)(1/2)

i = 0.04375

n = tm

n = (2 3/4)(2)

n = 11.5

F = P(1 + i)n

= [ 50,000(1 + 0.04375)]11.5

F=50,000 (1.601627)(1.021641)

F = 81,814.38
1. Accumulate (FINAL VALUE) 10,00 for 3 years at

a. 9% compounded monthly

b. 9% compounded quarterly

Required: Fa and Fb

Solutions:

i = r/m =9%/12 = 3/4% = 0.75% = 0.0075

i = r/m = 9%/4

= 0.0225
n = tm = 3(12) = 36

n = tm = 3(4)

= 12
a. Fa = P(1 + i)n

= 10,000(1.0075)36

= 10,000(1.308645)

Fa = 13, 086.45

b. Fb = P(1 + i)n

= 10,000(1.0225)12

= 10,000(1.306050)

Fb = 13, 060.50

2. Discount (PRINCIPAL) 50,000 at 12% converted quantity for:

 a. 4 years and 6 months

b. 5 years and 9 months

Required: Pa and Pb

i = r/m =12%/4 = 3% = 0.03

= 3% or 0.03
i = r/m = 12%/4

n = tm = 4 1/2(4) = 18

n = tm = 23/4(4)

= 23
Pa = F/(1 + i)n

= 50,000/(1.03)18

= 50,000(1.707433)

Pa = 29,369.73

Pb = F/(1 + i)n

= 50,000/(1.03)23

= 50,000(1.9735865)

Pb = 25,334.59

Nominal and Effective Rates

Nominal Rate (j) - rate converted/ compounded once or more than a year.

a. 5% converted quarterly

j = 5%, m = 4

b. 10% converted monthly

 j = 10%, m= 12

Effective Rate (w) - rate converted once a year

a. 17% converted annually

j = 17%, m = 1

b. 10% effective

j = 10%, m = 1

Formula:

1 + w = (1 + j/m)m

Find the effective rate: a. annually equivalent to 7% convertedly b. quarterly

a.) w = ? , j = 7%, m = 1

b.) j = 7%, m = 4, w = ?

1 + w = (1 + j/m)m

1 + w = (1 + 7%/4)4

w = 0.07189

w = 7.1859%

Find the nominal rate compounded monthly equivalent to 10% effective.

w = 10%, j =? , m = 12

1 + w = (1 + j/m)m

12(1 + .10) =12(1 + j/12)12

(1.10)1/12 = 1+ j/12

(1.10)1/12 = antilog [1/12 log 1.10]

= antilog [1/12 (0.041392685)]

= antilog 0.00344939

= 1.00797414
 (1.10)1/12 = 1.00797414

0.00797414 = j/12

j/12 = 0.00797414

j = 12(00797414)

j = 0.09567 or 9.567%

Which rate is better on the part of the investor: [2 3/4%, m = 2] or [2 1/2%, m = 4]

a. 1 + w = (1 + j/m)m b. 1 + w = (1 + j/m)m

1 + w = (1 + (11/4)/2)2 1 + w = (1 + (2 1/2)/4)4

w = 0.27689063 or 2.7689% w = 0.0252353353 or 2.5235%

If interest is compounded quarterly, Find the effective rate if the nominal rate is: a. 3% b. 6%

Given: a.) wa = ? , j = 3%, m = 4

b.) wb = ? , j = 6%, m = 4

a. 1 + w = (1 + j/m)m b. 1 + w = (1 + j/m)m

1 + w = (1 + 3%/4)4 1 + w = (1 + 6/4)4

w = 0.030339191 or 3.0339% w = 0.06136551 or 6.1364%

What is the nominal rate compounded semi-annually will yield the effective rate 9%?

j = ?, m = 2, w = 9%

1 + 1/2 = 1.044031

j = 2(0. 044031)

j = 8.806%

1 + w = (1 + j/m)m
2(1 + 0.9)2 = 2(1 + j/2)2

(1.09)2 = 1 + j/2

(1.09)2 = antilog [1/2 log 1.09]

= antilog [1/2 (0.37426497)]

= antilog 0.18713248

(1.09)2 = 1.0440306

0.440306 = j/2

j/2 = 0.440306

j = 2( 0.440306)

j = 0.088062 or 8.806%