Wednesday, 29 May 2013
Banker's Rule
BANKER’S RULE
For Banker’s Rule, we use ordinary interest
with exact time. If the method of calculating interest is not given, the
Banker’s Rule will prevail.
Example
10
A person obtains a RM3500 loan
from a bank that charges an interest of 7.25%. The loan was granted on 20 May
2007 and matures on 14 September 2007. What is the maturity value of the loan?
Example
11
Sunita borrowed RM12000 from a
finance company. The interest charged was 9%. If Sunita repaid RM12450 to
settle the loan, calculate
a)
the
interest charged on the loan
b)
the
length of time of the loan in days.
Exact Simple Interest And Ordinary/Approximate Simple Interest
EXACT SIMPLE INTEREST AND ORDINARY/APPROXIMATE
SIMPLE INTEREST
Exact simple interest – the correct number of days for
each month is used.
Thus, each year has 365 days. If
the year is a leap year, it has 366 days.
Ordinary/Approximate simple interest – we
assume each month has 30 days. Thus, each year has 360 days.
Example
9
Calculate the four types of
interest and maturity value as above for a RM4500 loan at an interest of 8%.
The duration of the loan is from 5 July 2007 to 16 November 2007.
|
Exact Time
|
Ordinary/Approximate Time
|
|
Exact Time
with
Exact Simple Interest
|
Exact Time
with
Ordinary/Approximate Simple Interest
|
|
Ordinary/Approximate Time
with
Exact Simple Interest
|
Ordinary/Approximate Time
with
Ordinary/Approximate Simple Interest
|
Exact Time and Ordinary Time
EXACT TIME AND ORDINARY TIME
Exact time – the correct number of days for each month is used. For
example, 31 days for March, 30 days for June and so
on. When using the exact date, the total number of days in a year is 365 or 366
if it is a leap year.
Ordinary/Approximate time – we
assume each month to have 30 days, even if that month does not
actually have 30 days. Thus, each month from January
to December has 30 days. Using ordinary time, the total number of days in a
year is assumed to be 30 days. Using ordinary time, the total number of days in
a year is assumed to be 30 days multiplied by 12 months i.e 360 days.
Example
8
Find the exact and ordinary/approximate
time between the following dates.
a)
From
23 March 2009 to 12 August 2009.
b)
From
11 January 2012 to 4 April 2012.
Simple Amount
SIMPLE AMOUNT FORMULA
Total
amount of money obtained or iccured after a certain period of time, t. with
S = Simple Amount or Sum
I =
Simple Interest
P = Principal
r = Simple Interest Rate
t = Time (in years)
Example
4
Calculate the maturity value for
an investment of RM3500 at an interest rate of 5.5%. the investment matures
after 7 years.
Example
5
A person borrows RM975 from a bank
at an interest of 11.25%. After some time, he pays the bank RM1304.10 as full
and final settlement of the loan. What is the duration of his loan?
Example
6
Rahimi obtained a RM2000 loan from
a bank which charges an interest of 7.5%. siti intends to settle the loan after
2 years.
a)
Calculate
the amount of interest Siti will need to pay.
b)
What
is the maturity value of Siti’s loan?
Example
7
May Lyn made three deposits of
RM100 each at ABC Bank. Each deposit was made one month after the previous
deposit. The accounts with ABC Bank earn an interest of 9%. Calculate the value
of the accounts three months after the first deposit.
Monday, 27 May 2013
Simple Interest
INTRODUCTION
· DEFINITION 1 :
Interest is money earned when money is invested.
· DEFINITION 2 :
Interest is a charged incurred when a loan or credit is obtained.
SIMPLE INTEREST FORMULA
Simple
interest is given by the following formula with
I = Simple Interest
P = Principal
r = Simple Interest Rate
t = Time (in years)
Example
1
Find the amount of interest
charged for the following loans.
a)
A
loan of RM2500 at rate of 6.25% for 4 years.
b)
A loan
of RM1800 at rate of 7% for 30 months.
c)
A
loan of RM800 at a rate of 10% for 5 years and 6 months.
Example
2
A man applies for a personal loan
from a bank for the amount of RM21000. The bank charges interest of 11%. If the
bank calculates that the interest is RM16170, how long is the duration of the
loan?
Example
3
Rashid opened an account with a
deposit of RM400. Two months later, he deposited an additional RM500 into the
account. The account pays an interest of 8%. Calculate the interest for
a)
the
first two months after opening the account
b)
the
next four months after he made his second deposit.
Subscribe to:
Comments (Atom)