: com terest Simple interest When money is lent, the lender expects th, ; ¢ borrower 5 The amount of money lent is called the Principal and i Pay for the use of the money. called the Interest. Interest on money borrowed is pay ee oe Ade for lending itis half-yearly or yearly) and the money is said ts eh ot definite intery at interest is obviously proportional to t nt at simple interest. Si ae 4 he amou i es i given principal during equal intervals cries lent and will be the same amount on Compound interest If the interest, when it falls due, is not aid di amount borrowed, then the principal will incresea yong eBdeF But is added to the bunt bor ill increase with the time, W at simple interest, assuming no repayment, the pe oney islet al is constan 7 principal is increased each year (or at other in < the money is said to be lent at Compound Iateneat sod cen ea their the annual interest will also increase. The total sum owed alter ann nen (i. the new principal) is called the Amount, ai tebtetece The following abbreviations are traditional and will be used ¢ chapter: . P stands for principal; J stands for interest; A stands for amount; R stands for rate per cent per annum; T stands for the time in years. SIMPLE INTEREST Calculation of simple interest Interest is usually expressed as a percentage of the principal. The interest is obviously Proportional to the principal and to the rate of interest per annum. It is also Proportional to the time. If money is lent at 4% per annum for 3 years, the total interest paid during that time will be 12% of the principal. Similarly if money is lent at R% per annum for T years, the interest is RT % of the principal. 2. 1=RTZOP Scanned with Camscanner{8 Ordinary levol mathomatics {his formula, by simple algebraic manipulation, may be used to express any one g PR, Tin terms of the other letters, iv p 101, e pet "ar: 1001, and Examnut 1 Find the simple interest on £325 in 5 years at 3% per annum. a PRT ~ 100 Pxamte 2 Find at what rate per annum simple interest £525 will amount to £588 in3 year, | 1 = A~P = £588—£525 = £63, 1OOl 10063 _ 4x63 Rat PT” 335x3 “2x3 74% To find the principal, given the amount EXAMPLE 3 A sum of money invested at 3 ‘% per annum simple interest amounts after 4 years ty £280. Find the sum incested. The interest in 4 years is 12% of the principal | ‘The amount is therefore 112% of the principal “112% of the principal = £280 and the principal = 29 of £280 = £50, Exercise 7.1a } Find the simple interest on £680 in 4 years at $°% per annum. 2. Find the simple interest on £121 in $ years at 3% per annum, F arite Simple interest on £280 in 4 years i £39.20, find the rate per cent per annum, 4 the simple interest on £500 for 3 years is £37.50, ind the rate er cent per annum, § Mthe simple interest on £220 at 4% per annum is £44, find the Gre $ {be simple interest on £720.50 at 4% per annum is £72.05, nd the time, 7 Aiba simple interest on a sum of money invested at 3% per antes feo 2 years is £123, find the principal h amounts at simple interest to £530 in 3 years at 2 % per annum 10 Find the principal which amounts at simple interest to £48330 in 4 years at 49% pet annum. Exercise 7.1b Scanned with CamScanner1210 amounts 10 £235.20 at 99 IE£168 amounts to £189 at 5% Ifthe simple interest on find the sum. 8. Find the principal whic 9 Find the principal which annum. 10 annum. mounts simple interest to £840 in 3 years at 4% amounts at simple interest to £108 10 in 2] years at 2} Simple and compound intorast 69 4 Per annum, find the time “a Det annum find the time, of money invested at 24% per annum for 6 years is £127.20, num per Find the principal which ‘a amounts at sit es simple interest to £597.50 in 3} years at 6% per COMPOUND INTEREST Calculation of compound interest In calculating the compound int inci ear rest, the principal at the begit eo th yeginning of each yea must be found. The work is best set out in tabular form. There is a useful device for finding 4% (for example) of a sum of money. Multiply the sum of money by 4 the same time moving the decimal point two places to the left. This move of the decimal point is equivalent to division by 100. ExAMpLe 4 Find the compound interest on £450 in 3 years at 4% per ann Principal for first year Interest for first year Principal for second year Interest for second year = Principal for third year Interest for third year Final amount Original amount Interest £56,1888 The interest to the nearest penny is £56.19. ExampLe 5 F 249% is dy and so the amount at the beginnin interest for th:.. year. To find the interest to places of £1. To ensure this keep he nearest penny, we must obtain th 4 decimal places in the working and then correct to xd the compound interest on £285.38 in 4 years at 24% per annum. 1g of any one year is divided by 40 to give the result correct to 2 decimal 2dp. Principal for the first year = £285.38 Interest for the first year = _7.1345 Principal for the second year = 292.5145 Interest for the second year = _7.3129 Principal for the third year, = 2998274 Interest for the third year = 7.4987 Principal forthe fourth year = 307.3231 Tateren for thefourth year = 76831 Final amount = 315.0062 Original amount = 285.38 I = 29.6262 nterest = £29.63 (to 2 decimal places) “The interest to the nearest penny is £29.63. Scanned with CamScanner60. Ordinary level mathenatics unt at the end of any Formula for compound intorost ate of interest is 4% Pet 104°% of the amount at th nount is LOA? where P is the prin 2p and so on, Similarly if The amount after m years 15 ri ' ia) annum, the am he beginning of that year, At the end ncipal, at the end of the « the rate of interest 18 7% per supposing that the f articular year will be of the first year, the a year, the amount is (1.04) annum, the multiplying factor is (14400 . 100, An P(i4c) “es * f00, y be used in place of the tabular method. This formula m: 07.20 Exerci (Give answers to the nearest penny) £200 in 3 years at 4% per annum. £360 in 4 years at 3% per annum. £186.61 in 2 years at 24 % per annum. 10.50 in 3 years at 4% annum. at 3% per annum 1 Find the compound interest on 2 Find the compound interest on 3. Find the compound interest on 4 Find the compound interest on £37 5 Find the compound interest on £300 in 3 years Exercise 7.2b (Give answers to the nearest penny) terest on £200 in 4 years at 5% per annum. 3 Find the compound interest on £280 im 2 years at 37a per anna 3 Find the compound interest on £312.78 in 3 years a 3 Find the compound interest on £181.31 in 2 years at 6 per annum, § Find the compound interest on £408.38 in 3 Years at 3% pet annum. 1 Find the compound i owing or repayment swing or repayment st be calculated separat illustrated in the following exam jum, Find the total t at the end of a year, U ely and the interest ples. Periodical borr If the principal varies due to fresh borro amount at the beginning of each year mit for this amount worked out, The method i Exampie 6 A man invests £100 on January Ist of each year,at 4% per an rent at the end of 3 years. ‘amount of his invest He invests £100 Interest for first year = Value at end of first year = He invests another £100 - Value at beginning of second year = Interest for second year = Value at end of second year He now invests Value at beginning of third year = Interest for third year oP Value after three years: we £324, 6464 is £32465. ‘The amount of his investment, to the nearest penny. 4 Scanned with CamScanner