Simple Interest Formulas PDF

**SIMPLE INTEREST** Consider a situation wherein you borrow an amount of money and agree to pay it with interest after some fixed period of time. This is called simple interest. The formula for simple interest is given by: **LENDER OR CREDITOR** Person or institution that lends or makes money a...

**SIMPLE INTEREST** Consider a situation wherein you borrow an amount of money and agree to pay it with interest after some fixed period of time. This is called simple interest. The formula for simple interest is given by: **LENDER OR CREDITOR** Person or institution that lends or makes money available. **BORROWER OR DEBTOR** Person or institution that avails the money to be loaned. **PRINCIPAL OR PRESENT VALUE** The amount lent or borrowed; the value of the money today. **INTEREST** The amount to be paid for the privilege of using the money for the agreed upon period of time. **INTEREST RATE** The percentage of interest over the principal divided by the number of years. **ORIGIN OR LOAN DATE** The date the money is received by the borrower. **REPAYMENT DATE/ MATURITY DATE** The date on which the money borrowed is to be fully repaid. **TIME, PERIOD, OR TERM** The number of years the money is to be borrowed; the number of years from origin to maturity date. **FUTURE VALUE, MATURITY VALUE, OR ACCUMULATED VALUE** The amount to which the lender receives at the maturity date 𝒊 = 𝑷𝒓𝒕 FINAL OR FUTURE AMOUNT The formula for final amount is given by: 𝑭 = 𝑷 + 𝒊 𝒐𝒓 𝑭 = 𝑷(𝟏 + 𝒓𝒕) Where; F = final or future amount P = Principal i = interest r = interest rate t = time **COMPOUND INTEREST** The formula for compound interest (compounded annually) is given by: 𝑭 = 𝑷(𝟏 + 𝒓) 𝒕 Where; F = maturity/future/final value P = borrowed money or Principal r = interest rate in % t = time period The compound interest 𝐼𝑐 is given by 𝑰𝒄 = 𝑭 − P **MATURITY VALUE** \(F) The formula for compound interest (compounded m times a year) is given by: 𝑭 = 𝑷(𝟏 + 𝒓 𝒎 ) 𝒎𝒕 Where; F = maturity/future/final value P = borrowed money or Principal r = interest rate in % t = time period m= frequency of conversion NUMBER OF COMPOUNDING TIMES IN A YEAR 𝒎 = 𝟏 COMPOUNDED ANNUALLY 𝒎 = 𝟐 COMPOUNDED SEMIANNUALLY 𝒎 = 𝟒 COMPOUNDED QUARTERLLY 𝒎 = 𝟏𝟐 COMPOUNDED MONTHLY 𝒎 = 𝟑𝟔𝟓 COMPOUNDED DAILY