4.6 Review, Symbols, and Formulas
key Concepts
4.1: Principal, Rate, Time
- Calculating the amount of simple interest either earned or charged in a simple interest environment
- Calculating the time period when specific dates or numbers of days are involved
- Calculating the simple interest amount when the interest rate is variable throughout the transaction
4.2: Moving Money Involving Simple Interest
- Putting the principal and interest together into a single calculation known as maturity value
- Altering a financial agreement and establishing equivalent payments
4.3: Application: Savings Accounts and Short-Term GICs
- How to calculate simple interest for flat-rate and tiered savings accounts
- How to calculate simple interest on a short-term GIC
4.4 Application: Treasury Bills and Commercial Papers
- The characteristics of treasury bills
- The characteristics of commercial papers
- Calculating the price of T-Bills and commercial papers
- Calculating the yield of T-Bills and commercial papers
The Formulas You Need to Know
Symbols Used
[latex]S[/latex] = Maturity value or future value in dollars
[latex]I[/latex] = Interest amount in dollars
[latex]P[/latex] = Principal or present value in dollars
[latex]r[/latex] = Interest rate (in decimal format)
[latex]t[/latex] = Time or term
Formulas Introduced
Simple Interest: [latex]I=Prt[/latex]
Maturity Value: [latex]S=P(1+rt)[/latex]
Present Value: [latex]P=\frac{S}{1+rt}[/latex]
