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Business Math2

Business Math2. Revision. Example. Christina Jones paid the bank $44 interest at 11% for 120 days. How much did she borrow?. Principal = Interest Rate x Time. $44 . P = .11 x (120/360) = $1,200. Example.

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Business Math2

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  1. Business Math2 Revision

  2. Example Christina Jones paid the bank $44 interest at 11% for 120 days. How much did she borrow? Principal = Interest Rate x Time $44 . P = .11 x (120/360) = $1,200

  3. Example Christina Jones borrowed $1,200 from the bank. Her interest is $44 for 120 days. What rate of interest did Christina pay? $44 . R = $1,200 x (120/360) = .11

  4. Example Christina Jones borrowed $1,200 from the bank. Her interest is $44 for 11%. How much time does Christina have to repay the loan? $44 . T = $1,200 x .11 = .33 .33 x 360 = 120 days

  5. Simple interest

  6. Example Let's say you decided to start a candle-making business for some extra income. You already had several orders, but because you let customers pay once they got their candles, you needed $2,000 startup money to purchase supplies and equipment. You borrowed the $2,000 for two years at a simple interest rate of 10%. At the end of the two years, how much interest would be paid? If you sold the candles for $6.00 each, how many candles (sold) would cover the interest?

  7. Simple interest

  8. Examples • What is the interest rate for the investment of a person who deposits 500$ in a bank for 5 months and 600$ for 8 months and 700$ for 12 months knowing that the total maturity value =2000$

  9. Examples • A person invested a principal P in bank A for 5 months, the bank offers an interest rate of 10%, and invested the same amount in bank B that offers a rate of 8% for 7 months • If the man had a total amount of 3000$ at the end of the periods, what was P?

  10. Examples • Ahmad borrowed 500$ from a bank in April 3, when the loan matured, he repaid 530$. If you know that the interest rate in this bank was 8%, at what day Ahmad repaid the loan?

  11. Examples • Ali borrowed 20,000$ from a bank for 219 days, If the difference between the exact interest and the ordinary interest at the end of the period was 10$, What was the interest rate in that bank?

  12. Examples • Omar invested a principal P in bank A for a year. The interest was 50$ at the end of the year. He invested the same amount in bank B which its interest rate increases 1% than the first bank. The interest in the second bank was 165$ after 3 years. What was P and the interest rate in the two banks?

  13. Examples • A person borrowed three loans • 1000$ in 25 March 1980 • 2000$ in 17 June 1980 • 3000$ in 28 August 1980 • In 30 November 1980 the bank informed him that the total maturity in that date is 6216$. What was the interest rate in that bank

  14. ExercisesCompound Interest

  15. Example • Find the Future value and compound interest on $2,000 invested for four years compounded semiannually at 8%. • FV = $2,737.14 • CI = $737.14 • What would the simple interest be for the same loan? • $640

  16. Examples compound interest • Calculate the amount of money needed now to purchase a laptop computer and accessories valued at $2,000 in a year if you invest the money at 6% compounded annually. • $1,886.79 • John wants to replace a tool valued at $150 in a year. How much money will he have to put into a savings account that pays 3% annual interest? • $145.63

  17. Examples • How much money would you have to invest for 5 years at 6% paid semi-annually to make a down payment of $20,000 on a house? • $14,881.80 • How much money would you have to invest for 3 years at 10% paid semi-annually to purchase an automobile that costs $20,000? • $14,924.40

  18. Uniform Payment Series Value of payments (Future value)= sum of payments + sum of interests Future value of payments =

  19. Uniform Payment Series Sum of interest = Where A : the payment at the end (or start) of the period N: number of payments

  20. Examples A person deposits 100$ in a bank at the end of the month for 2 years. Find the future value of these payments at the end of the years if you know that interest rate is 10% Period of the first payment= 23 months Period of the last payment= 0 A = 100$ n= 24 payments R = 10 % yearly = (10/12) % monthly

  21. Future value of payments = 12

  22. Examples A person deposits 300$ in a bank every 3 months for one year. Find the future value of these payments at the end of the year if you know that interest rate is 6% Two solutions: If the payments paid at the start of the three months If the payments paid at the end of the three months

  23. Solution 1 If the payments paid at the start of the three months Period of the first payment= 12 months Period of the last payment= 3 months A = 300$ n= 4 payments R = 6 % yearly

  24. Solution 2 If the payments paid at the end of the three months Period of the first payment= 9 months Period of the last payment= 0 A = 300$ n= 4 payments R = 6 % yearly

  25. Quiz

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