Question: What is the significance of the 0 in the formula for simple interest?

[catch.yossarian]

In Mathworld, they define Simple Interest as:

a(t) = a(0)(1 + rt)

where a(t) is the sum of principal and interest at time t for a constant interest rate r.

I just want to know why that 0 is in there. Anything divided by 0 will be 0, thus a(t) = 0?

 

[malco97]

I would imagine that a(0) is the principle as it is the sum of the principle and the interest at t=0. Since there is no interest at t=0 the sum of the principle and the interest would be the principle.

 

[cookiemonster]

Anything divided by 0 is undefined...

They're saying a(t) is a function and a(0) is that function evaluated at t=0.

It would be more clearly written a[t] = (1 + rt)*a[t=0]

cookiemonster

 

[HallsofIvy]

In other words, the "a(0)" is not "a times 0", it is "the function a(t) evaluated at t= 0".

 

[russ_watters]

In other words, the "a(0)" is not "a times 0", it is "the function a(t) evaluated at t= 0".

And in still more words (well, actually less words), "a(0)" is the principal.

Ironic - I was just looking for this formula so I could buy a car...

edit: oops - they don't use that formula.

 

[Gokul43201]

Russ,

If you're talking about the depreciation curve, I think that's exponential, not linear.

Edit : No, you're calculating payments, aren't you. I think that's compounded.