biz math : CHAPTER 2 – SIMPLE INTEREST

Interest (unless stated otherwise) ussually expressed as per cent per annum. There are two type of interest : simple interest and compound interest.

Simple interest formula:
- simple interest formula is the interest calculated on the original principal for the entire period, it is borrowed or invested. It is the product of the principle multiplied by the rate and time, this may stated as the formula.

I = Prt

Where I = simple interest
P = principle
r = rate of simple interest
t = time or time in years

simple amount formula
- the simple amount is the sum of the original principle and the interest earned. The simple amount formula is given as

S = original principle + interest earned
S = P + Prt



Four basic concepts

1. exact time - it is the number of days between two given date
2. approximate time - it assumes amonth has 30 days in the calculation of
Number of days between two given dates.
3. ordinary simple interest - in calculating ordinary simple interest, we use a 360
day year
4. exact simple interest - this uses a 365/366 day year for interest computation