Lecture Practical business math procedures (11/e) - Chapter 10: Simple interest. The main contents of the dissertation consist of three main parts: Calculation of simple interest and maturity value, finding unknown in simple interest formula, . rule -- making partial note payments before due date. | Chapter Ten Simple Interest Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Learning unit objectives LU 10-1: Calculation of Simple Interest and Maturity Value List the steps to complete the . Rule. Complete the proper interest credits under the . Rule. LU 10-3: . Rule -- Making Partial Note Payments before Due Date LU 10-2: Finding Unknown in Simple Interest Formula Using the interest formula, calculate the unknown when the other two (principal, rate, or time) are given. Calculate simple interest and maturity value for months and years. Calculate simple interest and maturity value by (a) exact interest and (b) ordinary interest. 2 Maturity Value Maturity Value (MV) = Principal (P) + Interest (I) The amount of the loan (face value) Cost of borrowing money 3 Simple Interest Formula Simple Interest (I) = Principal (P) x Rate (R) x Time (T) Stated as a Percent Stated in Years Example: Jan Carley borrowed $30,000 for office . | Chapter Ten Simple Interest Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Learning unit objectives LU 10-1: Calculation of Simple Interest and Maturity Value List the steps to complete the . Rule. Complete the proper interest credits under the . Rule. LU 10-3: . Rule -- Making Partial Note Payments before Due Date LU 10-2: Finding Unknown in Simple Interest Formula Using the interest formula, calculate the unknown when the other two (principal, rate, or time) are given. Calculate simple interest and maturity value for months and years. Calculate simple interest and maturity value by (a) exact interest and (b) ordinary interest. 2 Maturity Value Maturity Value (MV) = Principal (P) + Interest (I) The amount of the loan (face value) Cost of borrowing money 3 Simple Interest Formula Simple Interest (I) = Principal (P) x Rate (R) x Time (T) Stated as a Percent Stated in Years Example: Jan Carley borrowed $30,000 for office furniture. The loan was for 6 months at an annual interest rate of 8%. What are Jan’s interest and maturity value? I = $30,000 x .08 x 6 = $1,200 interest 12 MV = $30,000 + $1,200 = $31,200 maturity value 4 Simple Interest Formula Simple Interest (I) = Principal (P) x Rate (R) x Time (T) Stated as a Percent Stated in years Example: Jan borrowed $30,000. The loan was for 1 year at a rate of 8%. What is interest and maturity value? I = $30,000 x .08 x 1 = $2,400 interest MV = $30,000 + $2,400 = $32,400 maturity value 5 Two Methods of Calculating Simple Interest and Maturity Value Exact Interest (365 Days) Time = Exact number of days 365 Method 1: Exact Interest Used by Federal Reserve banks and the federal government 6 Method 1: Exact Interest Exact Interest (365 Days) On March 4, Peg Carry borrowed $40,000 at 8%. Interest and principal are due on July 6. I = P x R x T 124 365 $40,000 x .08 x = $1, interest MV = P + I $40,000 + $1, = $41, maturity value Two Methods of .
