Scribd Logo
Upload

Welcome to Scribd!

  • 65 views

    Compound Interest

    Uploaded by

    Amer Ibrahim
    1. The document discusses the differences between simple and compound interest, with compound interest calculated on both the principal and accumulated interest over time. 2. Formulas are provided for calculating simple interest (I=PRT) and compound interest (I=P(1+R/n)^n - 1), along with examples of applying the formulas in various scenarios. 3. Compound interest allows interest to accrue on prior interest amounts as well as the principal, resulting in higher total interest than simple interest calculations.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Compound Interest

    Uploaded by

    Amer Ibrahim
    65 views4 pages
    1. The document discusses the differences between simple and compound interest, with compound interest calculated on both the principal and accumulated interest over time. 2. Formulas are provided for calculating simple interest (I=PRT) and compound interest (I=P(1+R/n)^n - 1), along with examples of applying the formulas in various scenarios. 3. Compound interest allows interest to accrue on prior interest amounts as well as the principal, resulting in higher total interest than simple interest calculations.

    Original Title

    compound interest

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    1. The document discusses the differences between simple and compound interest, with compound interest calculated on both the principal and accumulated interest over time. 2. Formulas are provided for calculating simple interest (I=PRT) and compound interest (I=P(1+R/n)^n - 1), along with examples of applying the formulas in various scenarios. 3. Compound interest allows interest to accrue on prior interest amounts as well as the principal, resulting in higher total interest than simple interest calculations.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    65 views4 pages

    Compound Interest

    Uploaded by

    Amer Ibrahim
    1. The document discusses the differences between simple and compound interest, with compound interest calculated on both the principal and accumulated interest over time. 2. Formulas are provided for calculating simple interest (I=PRT) and compound interest (I=P(1+R/n)^n - 1), along with examples of applying the formulas in various scenarios. 3. Compound interest allows interest to accrue on prior interest amounts as well as the principal, resulting in higher total interest than simple interest calculations.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 4

    Lec. 9 Compound Interest Dr.

    Samah Abo-EL-Hadid

    Compound Interest

    Learning Objectives
    1. Differences between simple and compound interest.
    2. Compute Compound interest with time in years or months.

    Definition
    1. Interest can be calculated in two ways: simple interest or
    compound interest.
    2. Simple interest is calculated on the principal (the original loan).
    3. compound interest is calculated on the principal and the
    accumulated interests of previous periods

    𝑛
    𝐼 =𝑃 1+𝑅 −1
    Where
    I = the compound interest
    P = the principal
    R = the annual compound interest rate written as a decimal
    n = the number of compounding periods.
    EXAMPLE (1)
    Find the simple and the compound interests on $10000 at 5% rate for 3
    years.
    Solution
    Simple interest: 𝐼 = 𝑃𝑅𝑇
    5
    𝐼 = 10000 × × 3 = $1500
    100
    Compound interest: 𝐼 = 𝑃 1+𝑅 𝑛 −1
    𝐼 = 10000 1 + 0.05 3 − 1 =$1576.25
    EXAMPLE (2)
    Find the simple and the compound interests on $800 at 7% rate for 6
    years.
    Solution
    Simple interest: 𝐼 = 𝑃𝑅𝑇
    7
    𝐼 = 800 × × 6 = $336
    100
    Compound interest: 𝐼 = 𝑃 1+𝑅 𝑛 −1
    𝐼 = 800 1 + 0.07 6 − 1 =$400.58

    1
    Lec. 9 Compound Interest Dr. Samah Abo-EL-Hadid

    EXAMPLE (3)
    Find the simple and the compound interests on $6000 at 9% rate for 12
    years.
    Solution
    Simple interest: 𝐼 = 𝑃𝑅𝑇
    9
    𝐼 = 6000 × × 12 = $6480
    100
    Compound interest: 𝐼 = 𝑃 1+𝑅 𝑛 −1
    𝐼 = 6000 1 + 0.09 12 − 1 =$10875.9
    EXAMPLE (4)
    Find the simple and the compound interests on $10000 at 8% rate for 12
    years.
    Solution
    Simple interest: 𝐼 = 𝑃𝑅𝑇
    8
    𝐼 = 10000 × × 12 = $9600
    100
    Compound interest: 𝐼 = 𝑃 1+𝑅 𝑛 −1
    𝐼 = 10000 1 + 0.08 12 − 1 =$15181.7
    EXAMPLE (5)
    Find the compound interest on $1000 at 5% rate for 5 years.
    Solution
    𝐼 =𝑃 1+𝑅 𝑛 −1
    𝐼 = 1000 1 + 0.05 5 − 1 =$276.3

    EXAMPLE (6)
    What is the compound interest on $5000 at 10% rate for 4 years.
    Solution
    𝐼 =𝑃 1+𝑅 𝑛 −1
    𝐼 = 5000 1 + 0.10 4 − 1 =$2320.5
    EXAMPLE (7)
    What is the compound interest on $15000 at 5% rate for 10 years.
    Solution
    𝐼 =𝑃 1+𝑅 𝑛 −1
    𝐼 = 15000 1 + 0.05 10 − 1 =$9433.4

    2
    Lec. 9 Compound Interest Dr. Samah Abo-EL-Hadid

    EXAMPLE (8)
    What is the compound interest on $2000 at 10% rate for 5 years.
    Solution
    𝐼 =𝑃 1+𝑅 𝑛 −1
    𝐼 = 2000 1 + 0.10 5 − 1 =$1221.02
    EXAMPLE (9)
    Find the compound interest earned on $1000 at 10% rate for 2 years,
    compounded semi-annually
    Solution
    𝑛 =2  2 = 4, 𝑅 =.05
    𝐼 =𝑃 1+𝑅 𝑛 −1
    𝐼 = 1000 1 + 0.05 4 − 1 =$215.5
    EXAMPLE (10)
    Find the compound interest earned on $500 at 4.5% rate for 1 year,
    compounded semi-annually
    Solution
    4.5%
    𝑛 = 1  2 =2, 𝑅 = =2.25%
    2
    𝑛
    𝐼 =𝑃 1+𝑅 −1
    𝐼 = 500 1 + 0.0225 2 − 1 =$22.75

    EXAMPLE (11)
    Find the compound interest earned on $1 at 6% rate for 3 years,
    compounded quarterly
    Solution
    6%
    𝑛 = 3  4 =12, 𝑅 = =1.5%
    4
    𝐼 =𝑃 1+𝑅 𝑛 −1
    𝐼 = 1 1 + 0.015 12 − 1 =$0.1956
    EXAMPLE (12)
    Find the compound interest earned on $1500 at 3% rate for 15 years,
    compounded monthly
    Solution
    3%
    𝑛 =15  12 =180, 𝑅 = =0.25%
    12
    𝐼 = 1500 1 + 0.0025 180 − 1 =$851.14

    3
    Lec. 9 Compound Interest Dr. Samah Abo-EL-Hadid

    EXAMPLE (13)
    Find the compound interest earned on $178560 at 3.5% rate for 62
    years, compounded semi-annually
    Solution
    3.5%
    𝑛 = 62  2 =124, 𝑅 = =1.75%
    2
    𝐼 =𝑃 1+𝑅 𝑛 −1
    𝐼 = 178560 1 + 0.0175 124 − 1 =$1356240.7

    EXAMPLE (14)
    Find the compound interest earned on $4000 at 4% rate for 20 years,
    compounded semi-annually
    Solution
    4%
    𝑛 = 20  2 =40, 𝑅 = =2%
    2
    𝐼 =𝑃 1+𝑅 𝑛 −1
    𝐼 = 4000 1 + 0.02 40 − 1 =$4832.1587

    EXAMPLE (15)
    Find the compound interest earned on $4000 at 4% rate for 20 years,
    compounded quarterly
    Solution
    4%
    𝑛 = 20  4 =80, 𝑅 = =1%
    4
    𝐼 =𝑃 1+𝑅 𝑛 −1
    𝐼 = 4000 1 + 0.01 80 − 1 =$4866.86
    EXAMPLE (16)
    Find the compound interest earned on $15000 at 11% rate for 3 years,
    compounded semi-annually
    Solution
    11%
    𝑛 = 3  2 =6, 𝑅 = =5.5%
    2
    𝐼 = 15000 1 + 0.055 6 − 1 =$5682.642

    You might also like

    pFad - Phonifier reborn

    Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

    Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


    Alternative Proxies:

    Alternative Proxy

    pFad Proxy

    pFad v3 Proxy

    pFad v4 Proxy