Different Types of Interest

Introduction of different types of interest:

Let us see about different types of interest. The interest is especially necessary for our everyday life and also this most imperative and interesting part in mathematics. This is the essential of much economic estimation. This is the adequate technique of earn the money. For illustration, finance and deposits. In bank areas the interest is one of the most central jobs for earn the money.

Definition:

Interest is the charge of somebody pays for the short-term implement. The interest may be depends on the principal amount. The interest is competent to be signifying during the percents per year or percents per month.

Different types of interest:

There are two different types of interest that it follows by the economic department like insurances, banks and etc.  The different types of interest are following below:

Interest 1: Simple interest.

Interest 2: Compound interest.

Interest 1: Simple interest:

The simple interest is one different category of the interest. The simple interest may be controlling the interest basis on their major amount.

Interest 2: Compound interest:

The compound interest is one different category of the interest.  The compound interests same as the simple interest. The compound interest happens to, if the interest comprise more than one year.

Formula:

Let us see the formulas for different types of interest.

1.    Simple interest:

The formula for the simple interest = P * N * R.

Explanation:

P point outs the principal amount.

N point out the number of year.

R point out the interest rate.

2.    Compound interest:

The formula for the compound interest = C (1 + r/ n) n *t.

Explanation:

C Point out initial deposit.

R Point out interest rate.

N Point out the times per year.

T Point out the number of years invested. Having problem with Imaginary Number keep reading my upcoming posts, i will try to help you.

Examples:

Let us see some examples of the different types of interest.

Example 1:

Find the simple interest, where Principal amount is 5000, rate is 0.09 with 3 years.

Solution:

The formula for simple interest = P*N*R.

= 5000 *0.09 *3.

=1350.

The cost of 1350 is simple interest.


Problem 2:

Find the compound interest where the principal amount is 8000, rate is 0.07 and compound quarterly 5 times per year. The money will stay account for 1 year.

Solution:

The formula for compound interest = P (1 + (r/n))nt.

= 8000 * (1 + (0.07 /5) 5*1.

= 8575.90.

The 8575.90 is compound interest.

Interest Compounded Quarterly

Introduction to interest compounded quarterly:

Interest is a fee paid on borrowed assets. It is the price paid for the use of borrowed money. Compound interest arises when interest is added to the principal, so that from that moment on, the interest that has been added also itself earns interest. This addition of interest to the principal is called compounding (for example the interest is compounded). In this article we shall discuss about interest compounded quarterly

Interest Formula for Compounded Quarterly

The basic formula for Compound Interest is:

FV = PV (1+r)n

PV is the current value or present value

r is the annual percentage rate of interest (percentage)

n is the total number of years the amount is deposit

FV = Future Value (amount of money collect after n number of years, with interest.)

Quarterly compounded interest = P (1 + r/n)nt = (Quarterly Compounding)


Interest Compounded Quarterly Example Problem

Ex 1:Rose deposits $7000 in a bank account, bank paying at the rate of 7% per year, compounded and credited quarterly. Find how much will he have at the end of 5 years?

Here p=$7000, n=4, r=7/100, t=5

Quarterly compounded interest = P (1 + r/4)4(5)

=7000(1+0.07/4)20

= 7000.00 is worth  9,903.45

Ex 2:Jessica deposits $6000 in a bank account, bank paying at the rate of 6% per year, compounded and credited quarterly. Find how much will he have at the end of 3 years?

Here p=$6000, n=4, r=6/100, t=3

Quarterly compounded interest = P (1 + r/4)4(3)

=6000(1+0.06/4)12

= 6000.00 is worth  7,173.71

Ex 3:Joseph deposits $5000 in a bank account, bank paying at the rate of 5% per year, compounded and credited quarterly. Find how much will he have at the end of 4 years?

Here p=$5000, n=4, r=5/100, t=4

Quarterly compounded interest = P (1 + r/4)4(4)

=5000(1+0.05/4)16

= 5000.00 is worth  6,099.45

Ex 4:Jim deposits $4000 in a bank account, bank paying at the rate of 5% per year, compounded and credited quarterly. Find how much will he have at the end of 6 years?

Here p=$4000, n=4, r=5/100, t=6

Quarterly compounded interest = P (1 + r/4)4(6)

=4000(1+0.05/4)24

= 4000.00 is worth  5,389.40