Annual Interest Rate Math

How to solve simple interest word problems investment problems.

Annual interest rate math. That is how simple interest works. For the above calculation you have 4 500 00 to invest or borrow with a rate of 9 5 percent for a six year period of time. A percentage the interest of the principal is added to the principal making your initial investment grow. If the loan was for two years and the amount of interest was 175 what simple interest rate was she.

A 5000 1 0 05 12 12 10 8235 05. Calculate the interest loan at start interest rate add the interest to the loan at start to get the loan at end of the year. If an amount of 5 000 is deposited into a savings account at an annual interest rate of 5 compounded monthly the value of the investment after 10 years can be calculated as follows. Effective annual interest rate 1 nominal rate number of compounding periods number of compounding periods 1 for investment a this would be.

A 10000 1 0 03875 5 11937 5 a 11 937 50 the total amount accrued principal plus interest from simple interest on a principal of 10 000 00 at a rate of 3 875 per year for 5 years is 11 937 50. R 5 100 0 05 decimal. Pay the same amount of interest every year. For example if a credit card has an apr of 10 you might pay roughly 100 annually per 1 000 borrowed.

What amount of money is loaned or borrowed this is the principal amount. Apr or annual percentage rate is the amount of money your bank charges you when it lends you money. 10 47 1 10 12 12 1. The loan at end of the year is the loan at start of the next year.

The annual percentage rate apr of a loan is the total amount of interest you pay each year represented as a percentage of the loan balance. Finding out your apr is simple if you follow this formula. Unless your apr is 0 you re actually paying extra money every time you leave a balance on your credit card. Displaystyle frac financecharges currentbalance 12months 100 apr.

Find the amount of interest earned by 8000 invested at 5 annual simple interest rate for 1 year. To start a mobile dog grooming service a woman borrowed 2 500. A simple job with lots of calculations. When you know the principal amount the rate and the time the amount of interest can be calculated by using the formula.

If we plug those figures into the formula we get the following. But there are quicker ways using some clever mathematics.