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Questions and Answers
What is the simple interest on ` 3,500 for 3 years at a rate of 12% per annum?
What is the simple interest on ` 3,500 for 3 years at a rate of 12% per annum?
If the principal is ` 5,000, the rate is 15%, and the time is 4.5 years, what is the simple interest earned?
If the principal is ` 5,000, the rate is 15%, and the time is 4.5 years, what is the simple interest earned?
Given that the principal is 4,500 and the amount is 7,200, what is the simple interest earned?
Given that the principal is 4,500 and the amount is 7,200, what is the simple interest earned?
If a sum of 12,000 amounts to 16,500 over 2.5 years, what is the rate of simple interest per annum?
If a sum of 12,000 amounts to 16,500 over 2.5 years, what is the rate of simple interest per annum?
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If a sum doubles in 10 years, how many years will it take to triple?
If a sum doubles in 10 years, how many years will it take to triple?
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What is the total compound interest earned after two years on a principal of `50,000 at an interest rate of 7% per annum compounded annually?
What is the total compound interest earned after two years on a principal of `50,000 at an interest rate of 7% per annum compounded annually?
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How is the principal for the second year in the compound interest calculation determined?
How is the principal for the second year in the compound interest calculation determined?
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How much more is the total compound interest compared to simple interest for the same principal and rate over two years?
How much more is the total compound interest compared to simple interest for the same principal and rate over two years?
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What is the formula used to calculate the interest for the first year in compound interest?
What is the formula used to calculate the interest for the first year in compound interest?
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If Saina deposits `1,00,000 for three years at an interest rate of 7% compounded annually, what is the total amount at the end of the third year?
If Saina deposits `1,00,000 for three years at an interest rate of 7% compounded annually, what is the total amount at the end of the third year?
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Study Notes
Mathematics of Finance
- Learning Objectives: Students will learn about interest concepts, simple and compound interest, annuities, present value, future value, and their applications in leasing, capital expenditure, and bond valuation.
Interest
- Simple Interest: Interest calculated only on the principal amount.
- Compound Interest: Interest calculated on both the principal and accumulated interest.
- Effective Rate of Interest: The actual interest rate earned after considering compounding frequency.
- Annuity: A series of equal payments made at regular intervals over a period.
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Annuity Types:
- Annuity regular: Payments at the end of the period.
- Annuity due/immediate: Payments at the beginning of the period.
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Applications of Annuities:
- Leasing
- Capital Expenditure (Investment Decisions)
- Valuation of Bonds
- Sinking Funds: Funds used to repay a debt through regular payments.
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First Payment/Receipt:
- End of the period
- Beginning of the period
- Future Value of Annuity: Is the future worth of a series of periodic payments.
- Present Value of Annuity: Is the current worth of a series of periodic payments.
- Principal: The initial value of the loan or investment.
- Rate of Interest: The rate at which interest is charged (usually expressed as a percentage).
- Accumulated amount/Balance: The total amount including principal and interest earned.
Learning Methodology
- Simple Interest Calculation: Formulas and examples are provided for calculating simple interest.
- Compound Interest Calculation: Formulas and examples are provided for calculating compound interest.
- Relationship between simple and compound interest: Simple interest is computed only on the principal, while compound interest is computed on the principal plus accumulated interest.
Specific Examples
- Examples demonstrate calculations of simple and compound interest, including scenarios with different compounding frequencies.
- Examples demonstrate calculations of present value and future value of various annuities and how they are used in finance.
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Description
Test your understanding of key financial concepts including simple and compound interest, annuities, and their applications. This quiz covers essential topics such as present value, future value, and various financial calculations, helping you solidify your knowledge in financial mathematics.
