CONCEPTS EXAMPLES 9.1 Calculate principal, rate, and time from simple interest formula. Principal: What is the principal needed to earn $100 interest in 120 days at 9%. $100 _ $100 p= —S100— _ $100 _ O09 xe ~ 0.03 ~ 8333338 What is the interest rate on a loan of $4,000 for 90 days that earns $50 in interest? _ — $50 $50 4,000 x 98, ~ $1,000 What is amount of time for a loan of $7,000 at 6.5% that earns $151.67 interest? Te —SIS1.67__ _ $151.67 7,000 x 0.065 55 0.333 x 360 days = 120 days = 0,333 years | 9.2 Discount a note. interest: Maturity Vaiue: A note for $2,000 at 9% due in 6 months, has been discounted 14% thirty days before maturity date. Calculate interest. Pox RxT= 7 $2,000 x 0.09 x = $90.00 Calculate maturity value. Pos iz M $2,000 + $90 = $2,090 Calculate bank discount. Mox DxTt= 2B $2,090 x 0.14 x $9 = $24.38 Calculate proceeds. Mo- 8B $2,090 - $24.38 = $2,065.62 fa bank discounts a note when the note has a number of days left before maturity, find the term of the dis- count period after calculating the maturity value and then calculate the bank discount and the proceeds. 9.3 Calculate compound interest. {f $3,000 is invested for 2 years at 12% compounded quarterly, compute the compound amount and compound interest. 12% + 4 = 3% per quarter 4 petiods per year; 2 years x 4 = 8 periods From Table 9-3, the value = 1.26677008 ‘Compound value = $3,000 x 1.26677008 $3,800.31 ‘Compound interest = $3,800.31 — $3,000 = $800.31 5999090090000