CHAPTER 10

Compound Interest and Annuities

10.1  INTEREST

One can define the term interest as the price paid for the use of borrowed money. It can be classified as simple interest and compound interest.

10.1.1  Simple Interest

It is calculated based on the outstanding principle amount that remains. The same can be evaluated by using the relation:

 

I = [P × N × R]/100

I is interest, P is the principal amount, N is number of years and R is the rate of interest.

Note: If N is in terms of months, it has to be modified in terms of years by dividing by 12.

EXAMPLES

  1. Find the total interest for the amount image10,000 for 3 years with rate of interest as 12%. ...

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