Simple Interest Formula Math Is Fun
A the future value of the investment loan including interest.
Simple interest formula math is fun. Interest 2000 5 4. P the principal investment amount the initial deposit or loan amount r the annual interest rate decimal n the number of times that interest is compounded per year. Interest 2000 0 05 4. Simple interest is almost never used in the real world with compound interest being preferred.
P 2000 r 5 and t 4. I p r t. Plus the principal of 1 000 means alex needs to pay 1 420 after 7 years. A 3 year loan of 1 000 at 10 costs 3 lots of 10.
Compound interest a p 1 r n nt. Interest 100 4 400. Interest calculated as a percent of the original loan. There is a formula for simple interest.
Interest 1 000 6 x 7 years 420. So the interest is 3 1 000 10 300. Pv fv 1 r n. And by rearranging that formula see compound interest formula derivation we can find any value when we know the other three.
Finds the present value when you know a future value the interest rate and number of periods. R fv pv 1 n 1. N number of periods. A few exercises showing how to compute or find the simple interest.