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Financial Mathematics - PDF

   

Added on  2021-04-21

12 Pages1252 Words127 Views
Running head: FINANCIAL MATHEMATICSFinancial mathematicsName of the studentName of the universityStudent IDAuthor note

1FINANCIAL MATHEMATICS Table of ContentsI.Simple interest....................................................................................................................2II.Compound interest..............................................................................................................4III. Present value......................................................................................................................6IV. Annuities............................................................................................................................9V. Present value of annuity.....................................................................................................9

2FINANCIAL MATHEMATICS I.Simple interest1.Amount and simple interestInterest = Principal * Rate * TimePrinciple = $ 13,750Rate = 10.25%Time = 3 years and 5 months = 41/12 yearsTherefore, Interest = $ 13,750 * 0.1025 * 41/12Interest = $ 4815.365Amount = Principal + InterestAmount = $ 13,750 + $ 4815.365 = $ 18,565.362.Exact simple interest and ordinary simple interestExact simple interestPrincipal amount = $ 15,180Interest rate = 9.125%Number of days = 180Converting the days into year –180 days = 180 days * 1/365 days = 180/365 yearsUsing formula to solve the simple interest,

3FINANCIAL MATHEMATICS Interest = Principal * Rate * TimeInterest = $ 15,000 * 0.09125 * 180/365Interest = $ 675Ordinary simple interestPrincipal amount = $ 15,180Interest rate = 9.125%Number of days = 180Converting the days into year –180 days = 180 days * 1/360 days = ½ yearsUsing formula to solve the simple interest,Interest = Principal * Rate * TimeInterest = $ 15,000 * 0.09125 * ½Interest = $ 684.375Therefore the amount of difference between ordinary simple interest and exact simple interestis ($ 684.375 - $ 675) = $ 9.843.Rate of interestPrincipal amount = $ 12,150Rate of interest = ?Time = 5 years

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