Chapter 4 - Simple Interest
Chapter 4 - Simple Interest
Chapter 4 - Simple Interest
SIMPLE INTEREST
SOLVE PROBLEMS INVOLVING SIMPLE
INTEREST & DISCOUNT
What is interest?
I = prt
Interest
Principal
Interest rate
written as a
decimal
The amount of
time the money
is invested or
borrowed
(years)
Exact Time
Exact time: time that is based on counting
the exact number of days in a time period.
Use 365 days for 1 year and use 366 days if
leap year is specified just add 1.
If loan includes the February of a leap year
(29 days)
If not specified the leap year then its 28 days
Ordinary Time
Ordinary time: time that assume each month
has 30 days and each year has 360 days.
EX: 90-day loan dated March 12 will be due
on June 12.
By using ordinary time simply count the
month using 30 days as 1 month and use the
same day number on which the loan is due.
Face Value
Promissory Notes
Term
Payee
Interest Rate
Date of Note
Promissory Notes
Face Value: Amount of money has been
borrow
Term: Time period of the note
Payee: Person , company that loaned the
money
Maturity value: The date the money is to be
repaid.
Promissory Notes
Legal document promising to pay back at future
date with a sum of money that has been borrow.
Promissory Notes Basic Formula:
1)Interest= Face Value (FV) x Rate (r) x Time
(T) , I = frt
2)Maturity Value (MV)= FV + I , MV = FV + I
THE END