Interest income calculation

Calculation of simple interest on initial capital.

It is used when servicing savings deposits with a monthly interest payment and when the interest is not added to the amount of debt, but is periodically paid to the creditor. The accrual formula for simple % is: F=P(1+nr), where F is the accrued amount, P is the initial capital, n is the accrual period of %, r is the % rate. Interest income: I=Pnr

2 options %:

1) exact - determined based on the exact number of days in a year (365 or 366), in a quarter (from 89 to 92), in a month (from 28 to 31), 2) ordinary% - determined based on the approximate number of days in a year, quarter, month (360, 90, 30).

2 options for determining the loan duration:

1) the exact number of days of lending is taken into account (calculation by day), 2) the approximate number of days of lending is taken into account (in a month - 30 days).

Often, when servicing current accounts, interest is calculated using percentage number Pt/100D and divisor D=T/r, where P is the initial capital, t is the duration of financial options in days, T is the number of days in a year. => Interest income: I=Pt/100D. Usually the amount on the account changes frequently. money is deposited and withdrawn. Then the total amount of accrued % for a certain period: the sum of all percentage numbers for each period of time when the amount on the account did not change is divided by the divisor.

In conditions of decreasing purchasing power of money, the real rate is more important than the nominal one. The amount will be: F*=F/I^t_p, where F - accrued amount, t - time, I_p - the value of the price index.

Accounting for bills.

Discounting a promissory note is the purchase of a promissory note from the owner before maturity at a price less than what it would be at the end of the term. (often called bill posting). Discount (D) - % of the bank deducted from the bill. It is interest for the time from the day of discounting n to the day of repayment of the bill for the amount F, payable at the end of the term. The bank discount rate is d => D=Fnd. The holder of the bill will receive the discounted value of the bill P=F-Fnd=F(1-nd) - bank (commercial) discounting. Usually, ordinary interest and the exact number of days are used.

Calculation of compound and continuous interest.

The investment is made with a compound percentage if the next annual income is calculated not from the initial value of the invested capital P, but from the total amount, which includes the interest previously accrued and not claimed by the investor. => capitalization of interest (attaching them to the accrued base) => the base increases. => Amount of invested capital = F_n=P(1+r)ⁿ,

% income = I=P((1+r)ⁿ-1)

If the loan is concluded for a number of years different from the whole, then % can be accrued according to the compound % scheme or according to the mixed scheme (compound % scheme for an integer number of years + for simple % for the fractional part of the year): F_n=P(1+r)^w(1+fr), where w is an integer number of years, f is a fractional part of a year, n=w+f.

Complex financial problems in banking practice => the task of accruing compound interest in a very short time => continuous calculation and capitalization of interest => accrued amount =Fn=Pe^δn, where δ - continuous rate (growth force).

Interest income = I=P(e^δn-1).

Financial annuities.

Financial rent (annuity) - unidirectional cash flow (no alternation of outflows and inflows of funds) with equal time intervals between two consecutive cash receipts. This constant time interval is annuity period (annuity period), any element of the cash flow - annuity member. An annuity, each term of which occurs at the end of the corresponding period - rent postnumerando, if at the beginning - prenumerando. Estimation of cash flow (and rent) can be performed as part of solving two problems:

1) direct, implying a total assessment of the accumulated cash flow - the future value of the cash flow is determined, 2) reverse - the total assessment of the discounted (discounted) cash flow - the present value of the cash flow is determined.

Author: Shevchuk D.A.

<< Back: Factors Determining Differences in Interest Rates

>> Forward: Lending organization

We recommend interesting articles Section Lecture notes, cheat sheets:

▪ Audit. Crib

▪ Special psychologist. Crib

▪ Internal illnesses. Lecture notes

See other articles Section Lecture notes, cheat sheets.

Read and write useful comments on this article.

<< Back

Latest news of science and technology, new electronics:

The existence of an entropy rule for quantum entanglement has been proven 09.05.2024

Quantum mechanics continues to amaze us with its mysterious phenomena and unexpected discoveries. Recently, Bartosz Regula from the RIKEN Center for Quantum Computing and Ludovico Lamy from the University of Amsterdam presented a new discovery that concerns quantum entanglement and its relation to entropy. Quantum entanglement plays an important role in modern quantum information science and technology. However, the complexity of its structure makes understanding and managing it challenging. Regulus and Lamy's discovery shows that quantum entanglement follows an entropy rule similar to that for classical systems. This discovery opens new perspectives in the field of quantum information science and technology, deepening our understanding of quantum entanglement and its connection to thermodynamics. The results of the study indicate the possibility of reversibility of entanglement transformations, which could greatly simplify their use in various quantum technologies. Opening a new rule ... >>

Mini air conditioner Sony Reon Pocket 5 09.05.2024

Summer is a time for relaxation and travel, but often the heat can turn this time into an unbearable torment. Meet a new product from Sony - the Reon Pocket 5 mini-air conditioner, which promises to make summer more comfortable for its users. Sony has introduced a unique device - the Reon Pocket 5 mini-conditioner, which provides body cooling on hot days. With it, users can enjoy coolness anytime, anywhere by simply wearing it around their neck. This mini air conditioner is equipped with automatic adjustment of operating modes, as well as temperature and humidity sensors. Thanks to innovative technologies, Reon Pocket 5 adjusts its operation depending on the user's activity and environmental conditions. Users can easily adjust the temperature using a dedicated mobile app connected via Bluetooth. Additionally, specially designed T-shirts and shorts are available for convenience, to which a mini air conditioner can be attached. The device can oh ... >>

Energy from space for Starship 08.05.2024

Producing solar energy in space is becoming more feasible with the advent of new technologies and the development of space programs. The head of the startup Virtus Solis shared his vision of using SpaceX's Starship to create orbital power plants capable of powering the Earth. Startup Virtus Solis has unveiled an ambitious project to create orbital power plants using SpaceX's Starship. This idea could significantly change the field of solar energy production, making it more accessible and cheaper. The core of the startup's plan is to reduce the cost of launching satellites into space using Starship. This technological breakthrough is expected to make solar energy production in space more competitive with traditional energy sources. Virtual Solis plans to build large photovoltaic panels in orbit, using Starship to deliver the necessary equipment. However, one of the key challenges ... >>

Random news from the Archive US:E smart door lock 29.01.2019 Kickstarter completes fundraising for US:E smart door lock that uses facial recognition. For recognition, the lock is equipped with a built-in camera. In addition, it is planned to release a variety with unlocking by fingerprint or password. The camera version stores up to 100 faces that can unlock the lock. Infrared illumination allows the lock to work in low light conditions. As stated, recognition algorithms cannot be deceived by presenting a photo or video to the camera. You can open the lock remotely using a mobile application. By the way, the lock camera can be used for remote monitoring. In addition, the lock is equipped with a built-in bell. Standard dimensions and fixing points simplify installation and make the lock compatible with "regular doors". Fundraising will continue for another four days, but the goal of the authors of the project - to raise at least $ 10 - has already been repeatedly exceeded. At the time of writing the news, the collected amount exceeded $000. For a lock with password protection, they offer to deposit $169. The facial recognition option will cost $259. Shipping should start in May this year.

Other interesting news:

▪ Ricoh AM S3P 5500D printer

▪ Acer SpatialLabs View Pro 3 27D monitor

▪ Speed ​​record in 5G network from Ericsson

▪ Electrohypercar Pininfarina Battista

▪ Good deed ransomware virus

News feed of science and technology, new electronics

Interesting materials of the Free Technical Library:

▪ section of the site Standard instructions for labor protection (TOI). Selection of articles

▪ article Bakunin Mikhail Alexandrovich. Famous aphorisms

▪ article What are lunar craters? Detailed answer

▪ article Straight knot. Travel Tips

▪ article Security systems. Encyclopedia of radio electronics and electrical engineering

▪ article Artificial algae. Chemical Experience

Leave your comment on this article:

All languages ​​of this page

Arabic	Hebrew	Polish
Bengali	Hindi	Portuguese
Chinese	Italian	Spanish
English	Japanese	Turkish
French	Korean	Ukrainian
German	Malay	Vietnamese

Home page | Library | Articles | Website map | Site Reviews

www.diagram.com.ua
2000-2024