Estioco, Armiela Shane V.

BSTM- year III

Research paper in BAM 050 BUSINESS MATHEMATICS

Introduction

Business math s a type of mathematics course that is meant to teach people about money
and provide them with the tools they need to make informed financial decisions. Business
math not only teaches about the specifics of finances related to owning and operating a
business but also offers helpful advice and information related to personal finance.

Business math is not just for business owners, contrary to what its name might suggest. A
number of different professionals utilize business math-related skills every day. Simple
interest is the cost of borrowing money, where the borrower pays a fee to the lender for the
loan. The interest, typically expressed as a percentage, can be either simple or compounded.
Simple interest is based on the principal amount of a loan or deposit. In contrast, compound
interest is based on the principal amount and the interest that accumulates on it in every
period. Simple interest is calculated only on the principal amount of a loan or deposit, so it
is easier to determine than compound interest.

Simple interest is calculated using the following formula:

Simple interest = P × r × n

Where:

P = principal amount

r = annual interest rate

n = term of loan in years

Generally, simple interest paid or received over a certain period is a fixed percentage of the
principal amount that was borrowed or lent. For example, say a student obtains a simple-
interest loan to pay one year of college tuition, which costs $18,000, and the annual interest
rate on the loan is 6%. The student repays the loan over three years. The amount of simple
interest paid is:

$3,240 = $18,000 × 0.06 × 3 and the total amount paid is:

$21,240 = $18,000 + $3,240

Compound Interest

Compound interest accrues and is added to the accumulated interest of previous periods; it
includes interest on interest, in other words. The formula for compound interest is:

Compound interest = P × (1+r)t -P

Where:

P= principal amount

r= annual interest rate

t= number of years interest is applied

It is calculated by multiplying the principal amount by one plus the annual interest rate
raised to the number of compound periods, and then minus the reduction in the principal
for that year. With compound interest, borrowers must pay interest on the interest as well as
the principal.

Simple Discount

The process of finding the present value of a given amount that is due on a future date and
includes a simple interest is called discounting at simple interest, or commonly, the simple
discount method. In other words, to discount an amount by the simple interest process is to
find its present value.
MATHEMATICS IS THE ART OF GIVING NAMES TO DIFFERENT THINGS!