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    Simple and Compound Interest Lesson 1

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    carolus
    This document defines key terms related to simple and compound interest in business mathematics, including: lender, borrower, loan date, repayment date, term, principal, rate, interest, simple interest, compound interest, and maturity value. It provides an example comparing the maturity values of a 10,000 peso investment over 5 years with a 2% simple interest rate versus a 2% compound interest rate calculated annually.

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    Simple and Compound Interest Lesson 1

    Uploaded by

    carolus
    17 views14 pages
    This document defines key terms related to simple and compound interest in business mathematics, including: lender, borrower, loan date, repayment date, term, principal, rate, interest, simple interest, compound interest, and maturity value. It provides an example comparing the maturity values of a 10,000 peso investment over 5 years with a 2% simple interest rate versus a 2% compound interest rate calculated annually.

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    This document defines key terms related to simple and compound interest in business mathematics, including: lender, borrower, loan date, repayment date, term, principal, rate, interest, simple interest, compound interest, and maturity value. It provides an example comparing the maturity values of a 10,000 peso investment over 5 years with a 2% simple interest rate versus a 2% compound interest rate calculated annually.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    17 views14 pages

    Simple and Compound Interest Lesson 1

    Uploaded by

    carolus
    This document defines key terms related to simple and compound interest in business mathematics, including: lender, borrower, loan date, repayment date, term, principal, rate, interest, simple interest, compound interest, and maturity value. It provides an example comparing the maturity values of a 10,000 peso investment over 5 years with a 2% simple interest rate versus a 2% compound interest rate calculated annually.

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    © All Rights Reserved
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    SIMPLE and

    COMPOUND
    INTEREST
    BUSINESS MATHEMATICS
    Lender or Creditor

    Person (or institution) who


    invests the money or makes
    the funds available
    Borrower or Debtor

    Person (or institution) who


    owes the money or avails of
    the funds from the lender
    Origin or Loan Date

    Date on which the money


    is received by the borrower
    Repayment Date or
    Maturity Date
    Date on which the money
    borrowed or loan is to be
    completely repaid
    Time or Term (t)
    Amount of time in years the
    money is borrowed or invested
    Length of time between the origin
    and maturity dates
    Principal (P)

    Amount of money
    borrowed or invested on the
    origin date
    Rate (r)
    Annual rate, usually in percent,
    charged by the lender
    Rate of increase of the investment
    Interest (I)

    Amount paid or earned for


    the use of money
    Simple Interest (Is)

    Interest that is computed on


    the principal and then added
    to it
    Compound Interest (Ic)

    Interest is computed on the


    principal and also on the
    accumulated past interests
    Maturity Value or Future
    Value (F)
    Amount after t years that the
    lender receives from the
    borrower on the maturity
    date
    Example

    Suppose you won 10,000 pesos and you


    plan to invest it for 5 years. A
    cooperative group offers 2% simple
    interest rate per year. A bank offers 2%
    compounded annually. Which will you
    choose?
    Suppose you won 10,000 pesos and you plan to invest it for 5 years. A
    cooperative group offers 2% simple interest rate per year. A bank offers 2%
    compounded annually. Which will you choose?
    Year COOP BANK
    Interest Amount Interest Amount
    1
    2
    3
    4
    5
    Total

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