Calculate Interest
Show how would you find interest using, P R T I.
I= P x R x T
Interest= Principal x Rate x Time
Show how you would find interest rate using, P R T I.
R= I/(PxT)
Show how you would find the principal amount using, P R T I.
P= I/(R x T)
Show how you would find time using, I P R T.
T= I/(P X R)
How do you calculate Mature Value?
Use abbreviations (MV, I, P, etc.)
MV= P + I
Hope Slater borrowed $40,000 for office furniture. The loan was for 6 months at an annual interest rate of 4%. What is Hope’s interest?
$800
$40,000 x 0.04 x (6/12) = $800
Tim Jarvis borrowed $820.21 from a bank. Tim’s interest is $19.48 for 90 days. What rate of interest did Tim pay using the ordinary interest method?
$19.48/ (820.21 x (90/360)) =0.095
9.5%
Tim Jarvis paid the bank $19.48 interest at 9.5% for 90 days. How much did Tim borrow using the ordinary interest method?
$19.48/(0.095 x (90/360)) =
$820.21
Tim Jarvis borrowed $820.21 from a bank. Tim’s interest is $19.48 and his rate is 9.5%. How long was the loan using ordinary interest method?
= .25
Convert to days
0.25 x 360 = 90 days
How many days are there when calculating exact interest?
365 days
Hope borrowed $40,000. The loan was for 18 months at a rate of 4%. What is the interest?
$40,000 x (18/12) x 0.04 = $2,400
$2,400
Oakwood Plowing Company purchased two new plows for the winter. In 200 days, Oakwood must make a single payment of $23,200 to pay for the plows. As of today, they have $22,500 saved. If Oakwood puts the money in a bank today, what rate on interest will it need to pay off the plows in 200 days?
Assume ordinary interest
$22,500 + $22,500 x R x (200/360) = $23,200
700/ (22,500 x (200/360) = R
0.056 = R
5.6%
Lucky champ owes $191.25 interest on a 6% loan he took out on his March 17 birthday to upgrade an oven in his Irish restaurant Lucky’s Pub and Grub. The loan is due on August 1. What is the principal (assume ordinary interest)?
$191.25/ (0.06 x (153/360)) = $7,500
Joey Logano won the 57th Daytona 500 in February 2015. If he paid back a $6,800 loan with $20 interest at 7.5%, what was the time of the loan?
Assume ordinary interest
$20=$6,800 x 0.075 x T
$20/($6,800 x 0.075)= T
0.0392=T
0.03892 x 360 = 14.11 = 15 days
How many days are there when calculating ordinary interest??
360 days
On March 4, Joe Bench borrowed $50,000 at 5%. Interest and principal are due on July 6.
Use exact interest!
27 days in March, 30 days in April, 31 days in May, 30 in June and 6 in July = 124 total days
$50,000 x 0.05 x (124/365) = $849.32
$849.32
Carol Miller went to Europe and forgot to pay her $740 mortgage payment on her New Hampshire ski house. For her 59 days overdue on her payment, the bank payment, the bank charged her a penalty of $15. What was the rate of interest charged by the bank? Round to the nearest hundredth percent?
$15/($740 x (59/360))= 0.1237
12.37%
Evander Holyfield (the champion boxer who had part of his ear bitten off by Mike Tyson) made $250 million during his boxing career but declared bankruptcy because of poor financial choices. His July interest at 15% was $155. What was Evander’s principal at the beginning of August (assume 360 days)?
$155/(0.15 x (31/360))= $12,000
Lance Lopes went to his bank to find out how long it will take for $1,000 to amount to $1,700 at 12% simple interest. Can you solve Lance’s problem? Round time in years to the nearest tenth.
$700/($1,000 x 0.12) = 5.8 years
Jeff Edsell owes $5,000 on an 4%, 90-day note. On day 50, Joe pays $600 on the note.
On day 80, Jeff makes an $800 additional payment. Assume a 360-day year.
What is Jeff’s adjusted balance after day 50 and after day 80? What is the ending balance due?
$5,000 x .04 x (50/360) = $27.78
$600 – 27.78 = $572.22
$5,000 – 572.22 = $4,427.78
$4,427.78 x .04 x (30/360) = $14.76
$800 – 14.76 = $785.24
$4,427.78 – 785.24 = $3642.54
$3,642.54 x .04 x (10/360) = $4.05
$3,642.54 + $4.05 = $3,646.59
On March 4, Joe Bench borrowed $50,000 at 5%. Interest and principal are due on July 6.
Use ordinary interest!
27 days in March, 30 days in April, 31 days in May, 30 in June and 6 in July = 124 total days
$861.11 interest
Lane French had a bad credit rating and went to a local cash center. He took out a $100 loan payable in two weeks at $115. What is the percent of interest paid on this loan (Do not round denominator) before dividing?
$15/ ($100 x (14/360)) = 3.857
385.7%
Interest: $250
Rate: 5.5%
Time: 3 years
$1515.15
Joanne and Ed Greenwood built a new barn with an attached arena. To finance the loan they paid $1,307 interest on $45,000 at 4.0%. What was the time, using exact interest (rounded up to the nearest day?)
$1,307/($45,000 x 0.04) = 0.726 years
0.726 x 365 = 266 days
Use U.S. Rule to solve for the final balance using ordinary interest.
Principal amount is $10,000 at 8% interest, for 240 days.
There is a partial payment on the 100th day of $4,000 and a partial payment on the 180th day of $2,000.
10,000 x 0.08 x (100/360)= $222.22
$4,000-$222.22=3777.78
10,000-3777.78= $6222.22
$6222.22 x 0.08 x (80/360) = $110.62
$2000- $110.62 = $1889.38
$6222.22-$1889.38=$4332.84
$4332.84 x 0.08 x (60/360) = 57.78
$57.78 + $4332.84 = $4390.61