How To Solve Interest Rate Math Problems

How To Solve Interest Rate Math Problems-35
The formula for calculating simple interest is:where p is your principal, r is the annual interest rate expressed as a decimal, and i is the interest you have earned after the money has been invested for t years.Example 1: You were a very thrifty and money-savvy child.

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Therefore, the percent equivalent of .45 is (.45)(100) = 45%.)Solution: To calculate the balance of an account, just add the interest you earned to the principal.Used by arrangement with Alpha Books, a member of Penguin Group (USA) Inc. To calculate continuously compounded interest use the formula below.Here's the bad news: Even though your account will grow slightly every year, you won't earn more interest!In simple interest problems, you only earn interest on the initial investment, no matter how long you've had an active bank account or how much interest that money has accrued.Whether they compound weekly (52 times a year), monthly (12 times a year), or quarterly (4 times a year) can make a big difference in your bottom line.The formula for calculating compound interest is slightly more complicated than simple interest; it looks like this: This time, your balance is ,292.47.Let's say you deposit 0 in an account whose interest is compounded annually at a rate of 6.0%.At the end of the first year, you will have a balance of 6, just like you would with simple interest.If your money grows according to simple interest, you're basically just earning a small percentage of your initial investment each year as interest.For instance, if the principal of an account is 0 and your annual interest rate is 6.75%, at the conclusion of every year you will have earned an additional .75 (since .75 is 6.75% of 0).


Comments How To Solve Interest Rate Math Problems

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