ECONOMICS
COMPOUND INTEREST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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$150
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$19.2
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$1219.2
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$1392
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Detailed explanation-1: -Francisco borrows $1200 for 10 months at a simple interest rate of 15% per year. Determine the discount and the proceeds. The discount D is the interest on the loan that the bank deducts from the loan amount. Therefore, the bank deducts $150 from the maturity value of $1200, and gives Francisco $1050.
Detailed explanation-2: -Therefore, it will take 50 years to get the double amount at a simple interest rate 2 % per annum.
Detailed explanation-3: -To calculate simple interest, multiply the principal amount by the interest rate and the time. The formula written out is “Simple Interest = Principal x Interest Rate x Time.” This equation is the simplest way of calculating interest.
Detailed explanation-4: -Sometimes, a bank will give what is called a discount loan: in this case, interest is deducted at the time the loan is obtained. For example, if we agree to pay a bank $9, 000 in 2 years at 6% simple discount, the bank will compute the interest: I = Prt = 9000(0.06)(2) = 1080, then deduct this from the total.