No.lil.l3b91 said:Homework Statement
Karl invested his savings in a short-term fund that was offering a simple interest rate of 5% p.a. The maturity value of the investment at the end of 300 days was $29,152.08.
a. Calculate the principal amount invested.
Round to the nearest cent
b. Calculate the interest earned during the period.
Round to the nearest cent
Homework Equations
p=I/rt
I=prt
The Attempt at a Solution
p=s(1+rt)
p=29,152.08(1+0.05*300/365)[/B]
Mark44 said:No.
The $29,152.08 is the amount at the end of the term, not the original investment amount.
You are missing an important relevant equation: A = P(1 + rt).
A is the amount that includes interest, and P is the amount that is invested at the beginning.
Mark44 said:You are missing an important relevant equation: A = P(1 + rt).
The formula I wrote (above) is for simple interest.Ray Vickson said:No: it is simple, not compound interest.
Mark44 said:The formula I wrote (above) is for simple interest.
I suspected that was the case.Ray Vickson said:Sorry: I thought I was replying to WWGD in Post #3, but somehow the system linked me to the wrong message.
Simple interest is a type of interest that is calculated as a percentage of the principal amount. It is a fixed rate of interest that is charged on the original amount borrowed or invested.
To calculate simple interest, you multiply the principal amount by the interest rate and the number of time periods. The formula is: Interest = (Principal * Interest Rate * Time) / 100.
The main difference between simple interest and compound interest is that simple interest is calculated only on the principal amount, while compound interest is calculated on the principal amount as well as the accumulated interest from previous periods.
Simple interest can help with financial planning as it allows individuals to easily calculate the amount of interest they will owe or earn on a loan or investment. This information can then be used to make informed decisions about borrowing or investing money.
One disadvantage of simple interest is that it does not take into account the effects of inflation, which can decrease the value of money over time. Additionally, simple interest may not be as profitable as compound interest in the long run as it does not allow for the compounding of interest over time.