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Simple Interest for Quarterly, Monthly, and Daily Calculations, including Interest on Bank Accounts

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- 1. Image Source: http://i.telegraph.co.uk
- 2. I=PxRxTWhere:I = the Interest Money created in dollarsP = the “Principal” starting amount of moneyR = the Interest Rate per year (in decimal form)T = the Time the money is Invested, or Borrowed, in Years
- 3. Interest can be calculated to be paid as Half-Yearly, Quarterly, Monthly, or Daily."T" needs to be entered as a fraction of a year, into I = PRT, because the Interest Rate is in units of years. Half Yearly : T = 1/2 Quarterly : T = 1/4 Monthly : T = 1/12 Daily : T = 1/365
- 4. Tahli borrows $2000 to buy a new TV at 18.5% pa Simple Interest charged 6 monthly, to be paid back over 2 years. What is the Interest each 6 months? I = PRT (T = ½ year) I = $2 000 x 0.185 x 1/2 I = $ 185 every 6 months Image Source: http://www.toogezer.com
- 5. Tahli borrows $2000 to buy a new TV and pays $185 Interest charged every 6 months, to be paid back over 2 years. What is the Total Interest paid ?Total I = $185 x 4 lots of 6 months (2 year Loan = 6mths + 6mths + 6mths + 6mths) = $185 x 4 = $740 Image Source: http://www.toogezer.com
- 6. Tahli borrows $2000 to buy a new TV and pays a total of $740 Interest over 2 years. What is the Total Amount to be paid back ?Total Amount = Principal + Total I = $2000 + $740 = $2740 Image Source: http://www.toogezer.com
- 7. Alexandra borrows $20 000 to set up a Beautician business at 16% pa Simple Interest charged Quarterly, to be paid back over 5 years and 3 months. What is the Interest each Quarter? I = PRT (T = 1/4 year) I = $20 000 x 0.16 x 1/4 I = $ 800 every Quarter Image Purchased by Passy World from Dreamstime.com
- 8. Alexandra borrows $20 000 for her business and pays $800 Interest charged Quarterly, to be paid back over 5 years and 3 months. What is the Total Interest paid ?Total I = $800 x 21 lots of 3 mth Quarters- 5 year 3mth Loan = (5 x 4 Quarters per year) + ¼ year = $800 x 21 = $16 800 Image Purchased by Passy World from Dreamstime.com
- 9. Alexandra borrows $20 000 for her business, and pays a total of $16 800 Interest over 5 yrs 3 mths. What is the Total Amount she pays back ?Total Amount = Principal + Total I = $20000 + $16 800 = $36 800 Image Purchased by Passy World from Dreamstime.com
- 10. Joyce Deposits $2 000 into an Internet Saver Account that gives her 5.4% pa Interest paid Monthly. She leaves the money there for 2 ½ years. What is the Interest she earns each Month? I = PRT (T = 1/12 year) I = $2 000 x 0.054 x 1/12 I=$9 every Month Image Source: http://www.mutualsavings.org
- 11. Joyce Deposits $2 000 into an Internet Saver Account that gives her $9 in Interest paid Monthly. She leaves the money in the account for 2 and1/2 years. What is the Total Interest paid ?Total I = $9 x 30 lots of One Month- 2 ½ year Loan = (2 x 12 Months per year) + 6 months = $9 x 30 = $ 270 Image Source: http://www.mutualsavings.org
- 12. Joyce Deposits $2 000 into an Internet Saver Account that gives her $270 in Interest over 2 ½ years. What is the Total Amount now in her Account ?Total Amount = Principal + Total I = $2000 + $ 270 = $2 270 Image Source: http://www.mutualsavings.org
- 13. Interest is calculated for the month on thefollowing Bank Account’s “Minimum MonthlyBalance” using an Interest Rate of 3% pa. Calculate the Total Interest for the Month. Date Transaction Balance June 1 $ 420 June 12 $ 300 Withdrawal $ 120 June 21 $ 250 Deposit $ 370
- 14. Date Transaction Balance June 1 $ 420 June 12 $ 300 Withdrawal $ 120 June 21 $ 250 Deposit $ 370The “Minimum Monthly Balance” is the lowestbalance for the month which is $120. June is a30 day month, and so Time in Years = 30/365.Interest Rate is 3% pa = 0.03 Now Use I = PRTI = $120 x 0.03 x 30/365 = $ 0.29
- 15. Interest is calculated DAILY on the followingBank Account’s current balance at the end ofeach day using a Rate of 4% pa.Calculate the Total Interest for the Month. Date Transaction Balance May 1 $ 540 May 18 $ 300 Deposit $ 840 May 25 $ 100 Withdrawal $ 740
- 16. For calculating Daily Interest we will need to do a separate calculation for each Balance. We also need to know how many days the account had that balance. Therefore we add a “Number of Days” Column onto our table:Date Transaction Balance Number of DaysMay 1 $ 540 (1 to 8) = 8May 9 $ 300 Deposit $ 840 (9 to 19) = 11May 20 $ 100 Withdrawal $ 740 (20 to 31) = 12May 31 (May has 31 days) <<Count Days on your fingers>>
- 17. Date Transaction Balance Number of DaysMay 1 $ 540 (1 to 8) = 8May 9 $ 300 Deposit $ 840 (9 to 19) = 11May 20 $ 100 Withdrawal $ 740 (20 to 31) = 12May 31 <<Days / 365 to make Years units>> Interest Rate is 4% = 0.04 Now use Balance $ and Days to Calculate PRT for each Balance: May 1 to 8 : PRT = 540 x 0.04 x 8/365 = $ 0.47 May 9 to 19 : PRT = 840 x 0.04 x 11/365 = $ 1.01 May 20 to 31 : PRT = 740 x 0.04 x 12/365 = $ 0.97 TOTAL DAILY INTEREST FOR MONTH = $ 2.45
- 18. http://passyworldofmathematics.com/All slides are exclusive Copyright of Passy’s World of Mathematics Visit our site for Free Mathematics PowerPoints

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