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:

Required: P

Solution:

I= 6,500

P=

r= 9%

6,500

P= (.09)(6)

t= 6 years
P= 12,037.04

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

r= 10%

= ( 20,000) (.10) (360)

140

t= 140 days
= 777.78

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

Given:

Required:

Solution:

P= 15,000

= Prt

r= 9%

= ( 15,000) (.09) (360)

60

60

t= 360

= 225

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

Required:

Solution:

P= 50,000

= Prt

r= 2%

= (50,000) (.02) (365)

20

20

t= 365

= 54.79

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

Given:

Required:

Solution:

P= 25,000

= Prt

r= 5%

= ( 25,000) (.05) (365)

40

40

t= 365

= 136.99

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
March 16
April
May
June
July
August
September
October
November 27
Total:

15
30
31
30
31
31
30
31
27
256 Days

b.

Actual Time
August 13
18
September
30
October
31
November
30
December 26
26
Total:
135 Days
2. Calculate the actual and the approximate time.

Approximate Time
14
30
30
30
30
30
30
30
27
251 Days

Approximate Time
17
30
30
30
26
133 Days

a. September 12, 2013- December 16, 2013

b. April 2, 2013- June 26, 2013
a.

b.

Actual Time
September 12
October
November
December 16
Total:

Actual Time
April 2
May
June 26
Total:

18
30
31
16
95 Days

Approximate Time
18
30
30
16
94 Days

28
31
26
85 Days

Approximate Time
28
30
26
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

September 18
October
November
December
January
February 2
Total:

Actual Time
12
31
30
31
31
2
137 Days

Approximate Time
12
30
30
30
30
2
134 Days

Ordinary Interest using 6% method

1. Find the ordinary simple interest using
the given below.
Required: ( ) Using 6% method

Given:
P = 10,000, r = 7% or 0.07 and t = 78
days
Solutions:
1. 78 = 60 + 15 + 3
= 1(60) + 1/4(15) + 1/2(6)
2. ( ) = (0.1)P
= (0.1)( 10,000)
( )

( ) = (0.001)P(1/2)
=(0.001)( 10,000)(1/2)
( ) = 5

= 100
3. ( ) = using 6% method for 78 days

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

= + +
= 100 + 25 + 5
= 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:
Fv = 12,000
d = 6 1/2%

Required: P
Solutions:
a. P = FA (1 -dtd)

t = 3 months

= 12,000 (1 - (0.065) 36/360)

Date of the note = March (3 months after

= 12,000 (1 - (0.065) 1/10)

March 12 is (36) days.)

= 12,000 (1 - 0.0065)

Discount date = May 7

P = 11,922

2. Given:
Date of note = September 1 (60 days after Sept 1 is 15 days)
Discount date = October 16
Fr = 27,000

Solutions:
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:

Solution:

d = 8%

Fv = (1)

P = 14,420
td = 30 days

= 14,420/(1-(0.08)30/360)
= 14,420/.99333

Required: Fv
Fv = 14,516.83

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:
Fv = 36,000
r = 8%
d = 9%

P = FA (1 -dtd)
= 37,199.88 (1 - (0.09) 60/360)
P = 36,641.88

Required: I & P
Solution:

I=F-P

FA = Fv (1+ rtn)
= 36,000 (1 + (8%)5/12)
= 36,000 (1 + 0.333)
FA = 37,199.88

= 37,199.88- 36,641.88
I = 558

1. Find the bank discount and the proceeds.

= October 30 - November 15 is 45 days.
Given:

I = FA (1+dt)
Fv = 48,000

= 48,000 (1 + (8%)(45/360)

d = 9%
td = 45 days
Date of note = November 15
Discount date = October 1

P = FA - I
= 48,000 - 480
P = 47,520

Required: I and P
2. Find the discount rate.
I = 480

Given:

P = 29,825
FA = Fv = 30,000
td = 42 days

I = FA - P
I = 175

d = ()
= 75/(30,000)(42,360)
= 175/3500

Required: I & d
d = 0.05 or 5%
Solution:

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

n = tm
= .09/4

= (3 years and 6 months)(4)

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

i = 0.0225

F = P (1 + i)n
= 10,000 (1.0225)14

F = 13, 654.83

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

n= 14
= 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:

n = tm

P = 10,000

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

r = 9%
n = 14
m=4
F = P(1 + i)n

t = 7/2
Required: F and I
Solution:

= [ 10,000(1 + 0.0225)]14
F = 10,000 (1.365483)

i = r/m = .09/4
F = 13,654.83
i = 0.0225
I = F -P
= 13,654.83 - 10,000

I = 3,654.83

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