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Example Questions
Example Question #1 : Mathematics Of Finance
What is the total interest made after 4 years on a simple interest loan that accumulates 13% each year and has original amount was $1350.
To solve this problem, first recall the formula to calculate simple interest.
where
From the question it's known that,
Thus the equation becomes,
Therefore $702 in interested accumulated after four years.
Example Question #1 : Mathematics Of Finance
Money is deposited in a bank account at 7% interest per year, compounded bimonthly. If no money is deposited into or withdrawn from the account, then how long will it take for the money to double?
9 years 6 months
10 years 2 months
10 years 0 months
9 years 8 months
9 years 10 months
10 years 0 months
If is deposited in a bank account with interest rate ( converted to a decimal) compounded times a year for years, then the final balance of the account is
Dividing both sides of the formula by , this is
The money doubles, so substitute 2 for . Also, set and (bimonthly), and calculate as follows:
, so this is 9 years and 11.52 months; rounding up to the next bimonth, this is 10 years even.
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