1313_section5o1

# 1313_section5o1 - Section 5.1 Simple Interest Future Value...

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Section 5.1 – Simple Interest, Future Value, Present Value, and Effective Rate 1 Section 5.1 Simple Interest, Future Value, Present Value, and Effective Rate Interest that is computed on the original principal only is called simple interest. Formula: t I Pr = where P = principal r = rate t = time (in years) The sum of the principal and interest after t years is called the accumulated amount. Formula: ) 1 ( rt P A + = Example 1: Find the simple interest on a \$1,000 investment made for 3 years at an interest rate of 5% per year. What is the accumulated amount? Example 2: Find the simple interest rate at which \$1,000 will grow to \$1,050 in 9 months.

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Section 5.1 – Simple Interest, Future Value, Present Value, and Effective Rate 2 Earned interest that is periodically added to the principal and thereafter itself earns interest at the same rate is called compound interest. Future Value with compound interest Formula: n i P A ) 1 ( + = where m r i = and mt n = . A
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## This note was uploaded on 02/21/2012 for the course MATH 1313 taught by Professor Constante during the Spring '08 term at University of Houston.

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1313_section5o1 - Section 5.1 Simple Interest Future Value...

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