Chapter 5: Mathematics of Finance
In this chapter, you will learn to:
- Solve financial problems that involve simple interest.
- Solve problems involving compound interest.
- Find the future value of an annuity, and the amount of payments to a sinking fund.
- Find the present value of an annuity, and an installment payment on a loan.
In this section, you will learn to:
- Find simple interest.
- Find present value.
- Find discounts and proceeds.
SIMPLE INTEREST It costs to borrow money. The rent one pays for the use of money is called the interest. The amount of money that is being borrowed or loaned is called the principal or present value. Simple interest is paid only on the original amount borrowed. When the money is loaned out, the person who borrows the money generally pays a fixed rate of interest on the principal for the time period he keeps the money. Although the interest rate is often specified for a year, it may be specified for a week, a month, or a quarter, etc. The credit card companies often list their charges as monthly rates, sometimes it is as high as 1.5% a month.
Adapted from Applied Finite Mathematics by Rupinder Sekhon (De Anza College), originally published by OpenStax CNX (cnx.org, collection col10613) under CC BY 3.0 (creativecommons.org/licenses/by/3.0/); that original material remains under CC BY 3.0. Includes material adapted from Applied Finite Mathematics (Sekhon and Bloom), LibreTexts, under CC BY 4.0. Changes were made. This adaptation by XYZ Homework is licensed under CC BY 4.0. License: CC-BY-4.0.