Related Pages The following table gives the Formulas for Simple Interest, Compound Interest, and Continuously Compounded Interest. Scroll down the page for more examples and solutions. The Simple Interest Formula is given by Simple Interest = Principal × Interest Rate × Time I = Prt where Example: Solution: She earns $540 at the end of 3 years. Example: Solution: She has to pay the bank $720 at the end of 2 years. Example: Solution: At the end of 3 years, he would have to pay $20,000 + $7,800 = $27,800 Tutorial On Simple InterestExamples:
How To Solve Interest Problems Using The Simple Interest Formula?Interest represents a change in money. If you have a savings account, the interest will increase your balance based upon the interest rate paid by the bank. If you have a loan, the interest will increase the amount you owe based upon the interest rate charged by the bank. Examples:
How To Use The Formula For Simple Interest To Find The Principal, The Rate Or The Time?Examples:
How To Solve Simple Interest Problems, Compound Interest Problems, Continuously Compounded Interest Problems, And Determining The Effective Rate Of Return?Examples Of Simple Interest Problems:
Examples Of Compound Interest Problems:
Examples Of Continuously Compound Interest Problems:
Example Of Effective Rate Of Return:
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Joe’s brother has just had a new baby, Emily. Joe decides that he would like to set up a savings vehicle in Emily’s name, to provide a nest egg for her when she is older. He knows how hard it is to save up money for a deposit on a mortgage, and wants to make it easier for Emily when she gets to that time on her life. Joe finds a long term savings account offering a rate of 4.2% effective annual interest rate (eAPR). He decides to put $1,000 into the account to open it, and to set up an automatic deposit of $50 per month from his regular bank account. Wondering how much this will amount to when Emily is 30 he enters $1000 into the Principal field, $50 into the Monthly Deposit field, 4.2 into the % Rate field, and 30 into the Years field. ResultsHitting the Calculate button brings up the results of the savings calculator. After 30 years the final balance will be $39,484. Of this, $18,000 is from the $50 monthly deposits he made. The remaining $20,484 is the interest which accrued in the account over the years. Joe plays around with the principal and monthly deposits to get a feel for how different inputs will affect the outcome. He notices that over such a long period, it is the size of the regular monthly payments that has the biggest effect on the final balance. For instance, increasing his monthly contribution from $50 to $60 results in a final balance $7,000 higher than the smaller $50 contribution. He decides he can afford the extra $10 a month and resolves to increase his monthly deposit. He also notes that the interest portion outweighs the amount he contributes. Looking at the ratio between interest and deposits (the green part of the chart compared to the yellow part), he sees that initially interest plays very little part in the growth. After 6 years, his deposits total $4,320, and the interest paid only $869. But as time goes on, the interest mounts up. By the 30th year, the interest totals $24,000, moving ahead of the deposits of $21,600 for the first time.
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Shortcut Trick \(12.5\% = \frac{1}{8}\) Let P be (8)3 = 512
CI of 3rd year = 64 + 8 + 8 + 1 = 81 81 = 1944 \(⇒ 512 = \frac{{512 \times 1944}}{{81}}\) ⇒ P = 12288 \(SI = \frac{{PRT}}{{100}}\) \(⇒ \frac{{12288 \times 15 \times 5}}{{100}}\) ⇒ 9216 ∴ The required simple interest is Rs. 9216. India’s #1 Learning Platform Start Complete Exam Preparation
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