SIMPLE vs COMPOUND INTERESTIsimp. = P *r *twhere P - principal amount (the initial amount you borrow or deposit),r - annual rate of interest (as a decimal),t - number of years the amount is deposited or borrowed for.ntI comp.= P + [(1+)" – 1]where n - number of times the interest is compounded per year.2. If you take a three-year simple-interest loan of 100 000 CZK at an annual interest rate of 5,5%, what would be the total amount of interest paid?Total number ofPrincipalInterest rateTime periodTotal Interest paidcompounding(CZK)(as a decimal)(number of years)periods(CZK)100,0000.055316,5003. How much interest on interest is earned in an account by the end of 5 years if € 100 000 is deposited and interest is 4% per year, compounded quarterly?Interest per period Compound InterestearnedSimpleInterestInterestTime periodCompoundingfrequencyPrincipalInterest rateTotal number ofoncompounding periods(EUR)(as a decimal)(number of years)(times per year)(as a decimal)(EUR)(EUR)(EUR)100,00022,019.002,019.000.0454200.010020,000.00

2. Calculation showing the total amount of interest paid under simple interest method: Interest=…

SIMPLE vs COMPOUND INTEREST Isimp. = P * r *t where P - principal amount (the initial amount you borrow or deposit), r - annual rate of interest (as a decimal), t- number of years the amount is deposited or borrowed for. nt I comp. = P * [(1+ - [(1 + ) – 1] where n - number of times the interest is compounded per year. 2. If you take a three-year simple-interest loan of 100 000 CZK at an annual interest rate of 5,5%, what would be the total amount of interest paid? Total number of Principal Time period Total Interest paid Interest rate compounding periods (CZK) (as a decimal) (number of years) (CZK) 100,000 0.055 3 16,500 3. How much interest on interest is earned in an account by the end of 5 years if € 100 000 is deposited and interest is 4% per year, compounded quarterly? Compounding Compound Interest Simple Interest Interest Principal Interest rate Time period Interest per period t Total number of frequency earned on compounding periods (EUR) 20,000.00 (EUR) (as a decimal) (number of years) (times per year) (as a decimal) (EUR) (EUR) 100,000 2,019.00 0.04 5 20 0.0100 22,019.00

SIMPLE vs COMPOUND INTEREST Isimp. = P * r t where P - principal amount (the initial amount you borrow or deposit), r - annual rate of interest (as a decimal), t- number of years the amount is deposited or borrowed for. nt I comp. = P [(1+ - [(1 + ) – 1] where n - number of times the interest is compounded per year. 2. If you take a three-year simple-interest loan of 100 000 CZK at an annual interest rate of 5,5%, what would be the total amount of interest paid? Total number of Principal Time period Total Interest paid Interest rate compounding periods (CZK) (as a decimal) (number of years) (CZK) 100,000 0.055 3 16,500 3. How much interest on interest is earned in an account by the end of 5 years if € 100 000 is deposited and interest is 4% per year, compounded quarterly? Compounding Compound Interest Simple Interest Interest Principal Interest rate Time period Interest per period t Total number of frequency earned on compounding periods (EUR) 20,000.00 (EUR) (as a decimal) (number of years) (times per year) (as a decimal) (EUR) (EUR) 100,000 2,019.00 0.04 5 20 0.0100 22,019.00

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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