Business Math Flashcards
(69 cards)
the amount a borrower pays for using the money.
Interest (I)
the amount of money borrowed or deposited.
Principal(P)
the interest paid on one unit (peso) of capital (principal).
Rate of interest(r)
the amount of time allotted for repayment of the principal plus the interest. It is a term in years.
Time(t)
The principal amount plus the interest. Also called Future Value (FV) or Maturity Value.
Amount (A) or Balance
It is an interest that is computed on the principal amount
only.
Simple interest
It is an interest computed on the principal
and also on the accumulated
interest
Compound Interest
Simple interest formula
Is = Prt
Compound Interest formula
The amount (A) at the end of the year is equal to the sum of the principal (P) and the interest (Pr) for that year.
Ic = A - P
A = P + Pr = P(1 + r)
Simple interest Maturity Value or (Amount or
Balance) Formula
A = P + Is or
A = P + Prt or
A = P(1 + rt)
where:
A = Maturity value/Future value
P = Principal
Is = Simple Interest
Compound Interest Maturity Value or (Amount or
Balance) Formula
In general, when interest is compounded annually for n years, the amount (or future value) A is
A = P(1+ r)^t
Ic = A – P
where:
A = Maturity value/Future value
P = Principal
Ic = compound Interest
r = rate of interest, and
t = time or term in years or fraction of a year
Because interest is paid on interest, compound
interest is always _____ than simple interest.
greater
“Annual” ; K =?
K=1
“Semi-annual” ; k = ?
K=2
“Quarterly” ; K = ?
K = 4
“Monthly” ; k = ?
k = 12
“Daily” ; k = ?
k = 365
r/k is called the ____ ____
periodic rate
Compounding more than once a year formula
𝑨 = 𝑷(𝟏 + 𝒓/𝑲)^Kt
it pertains to the interval
for compounding
Period
Is. principal amount formula
P = Is/rt
P = F / (1 + rt)
Is. rate formula
r = Is/Pt
Is. time formula
t = Is/Pr
Ic. principal amount formula
𝑷 = 𝑨/ (𝟏 +𝒓/𝑲)^𝑲t
