{"id":42,"date":"2020-04-17T15:13:06","date_gmt":"2020-04-17T19:13:06","guid":{"rendered":"https:\/\/pressbooks.bccampus.ca\/businessmathematics\/?post_type=part&#038;p=42"},"modified":"2021-06-28T14:00:33","modified_gmt":"2021-06-28T18:00:33","slug":"chapter-3-simple-interest","status":"publish","type":"part","link":"https:\/\/pressbooks.bccampus.ca\/businessmathematics\/part\/chapter-3-simple-interest\/","title":{"raw":"Chapter 3: Simple Interest","rendered":"Chapter 3: Simple Interest"},"content":{"raw":"<div class=\"textbox textbox--key-takeaways\"><header class=\"textbox__header\">\r\n<p class=\"textbox__title\">Key Takeaways<\/p>\r\n\r\n<\/header>\r\n<div class=\"textbox__content\">Interest is based on the amount of money borrowed, the time allotted for paying it off, and the rate of interest.<\/div>\r\n<\/div>\r\n&nbsp;\r\n\r\nIf you were to borrow money from an individual or a financial institution such as a Bank or Credit Union, you would expect to be charged a number of dollars for the use of this money. This amount of compensation is called [pb_glossary id=\"3190\"]interest[\/pb_glossary]<strong>, <\/strong>and is based on the amount of money borrowed (called the [pb_glossary id=\"898\"]principal[\/pb_glossary]<em>), <\/em>the amount of time allotted for paying it off and the rate of interest.\r\n\r\nBy the same token, if you are to deposit some money in a financial institution, you would expect to get paid interest for allowing the financial institution to use your money. In reality, you are loaning money to the financial institution and they in tum earn an income on this money by either loaning it out or investing it.\r\n\r\nThe amount of[pb_glossary id=\"3191\"] simple interest[\/pb_glossary] is calculated by using the following relationship:\r\n<p style=\"text-align: center\">[latex]I = P\\times r\\times T[\/latex]<\/p>\r\nWhere:\r\n<ul>\r\n \t<li>I is the amount of interest earned;<\/li>\r\n \t<li>P is the amount of money (principal) borrowed or deposited;<\/li>\r\n \t<li><em>r<\/em> is the annual rate of simple interest; and<\/li>\r\n \t<li><em>t<\/em> is the time period in years<\/li>\r\n<\/ul>\r\nUsually, <em>r<\/em> (rate) is quoted as a percent per year (percent per annum or percent pa) and the time (<em>t<\/em>) in years. The units of rate and time <strong>must <\/strong>match.\r\n\r\n&nbsp;\r\n\r\n&nbsp;","rendered":"<div class=\"textbox textbox--key-takeaways\">\n<header class=\"textbox__header\">\n<p class=\"textbox__title\">Key Takeaways<\/p>\n<\/header>\n<div class=\"textbox__content\">Interest is based on the amount of money borrowed, the time allotted for paying it off, and the rate of interest.<\/div>\n<\/div>\n<p>&nbsp;<\/p>\n<p>If you were to borrow money from an individual or a financial institution such as a Bank or Credit Union, you would expect to be charged a number of dollars for the use of this money. This amount of compensation is called <a class=\"glossary-term\" aria-haspopup=\"dialog\" aria-describedby=\"definition\" href=\"#term_42_3190\">interest<\/a><strong>, <\/strong>and is based on the amount of money borrowed (called the <a class=\"glossary-term\" aria-haspopup=\"dialog\" aria-describedby=\"definition\" href=\"#term_42_898\">principal<\/a><em>), <\/em>the amount of time allotted for paying it off and the rate of interest.<\/p>\n<p>By the same token, if you are to deposit some money in a financial institution, you would expect to get paid interest for allowing the financial institution to use your money. In reality, you are loaning money to the financial institution and they in tum earn an income on this money by either loaning it out or investing it.<\/p>\n<p>The amount of<a class=\"glossary-term\" aria-haspopup=\"dialog\" aria-describedby=\"definition\" href=\"#term_42_3191\"> simple interest<\/a> is calculated by using the following relationship:<\/p>\n<p style=\"text-align: center\">[latex]I = P\\times r\\times T[\/latex]<\/p>\n<p>Where:<\/p>\n<ul>\n<li>I is the amount of interest earned;<\/li>\n<li>P is the amount of money (principal) borrowed or deposited;<\/li>\n<li><em>r<\/em> is the annual rate of simple interest; and<\/li>\n<li><em>t<\/em> is the time period in years<\/li>\n<\/ul>\n<p>Usually, <em>r<\/em> (rate) is quoted as a percent per year (percent per annum or percent pa) and the time (<em>t<\/em>) in years. The units of rate and time <strong>must <\/strong>match.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<div class=\"glossary\"><span class=\"screen-reader-text\" id=\"definition\">definition<\/span><template id=\"term_42_3190\"><div class=\"glossary__definition\" role=\"dialog\" data-id=\"term_42_3190\"><div tabindex=\"-1\"><p>Money earned on an investment, or paid on a loan.<\/p>\n<\/div><button><span aria-hidden=\"true\">&times;<\/span><span class=\"screen-reader-text\">Close definition<\/span><\/button><\/div><\/template><template id=\"term_42_898\"><div class=\"glossary__definition\" role=\"dialog\" data-id=\"term_42_898\"><div tabindex=\"-1\"><p>The original amount of money invested or borrowed.<\/p>\n<\/div><button><span aria-hidden=\"true\">&times;<\/span><span class=\"screen-reader-text\">Close definition<\/span><\/button><\/div><\/template><template id=\"term_42_3191\"><div class=\"glossary__definition\" role=\"dialog\" data-id=\"term_42_3191\"><div tabindex=\"-1\"><p>Interest earned without any compounding, that is interest paid only on the principal.<\/p>\n<\/div><button><span aria-hidden=\"true\">&times;<\/span><span class=\"screen-reader-text\">Close definition<\/span><\/button><\/div><\/template><\/div>","protected":false},"parent":0,"menu_order":3,"template":"","meta":{"pb_part_invisible":false,"pb_part_invisible_string":""},"contributor":[],"license":[],"class_list":["post-42","part","type-part","status-publish","hentry"],"_links":{"self":[{"href":"https:\/\/pressbooks.bccampus.ca\/businessmathematics\/wp-json\/pressbooks\/v2\/parts\/42","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/pressbooks.bccampus.ca\/businessmathematics\/wp-json\/pressbooks\/v2\/parts"}],"about":[{"href":"https:\/\/pressbooks.bccampus.ca\/businessmathematics\/wp-json\/wp\/v2\/types\/part"}],"version-history":[{"count":5,"href":"https:\/\/pressbooks.bccampus.ca\/businessmathematics\/wp-json\/pressbooks\/v2\/parts\/42\/revisions"}],"predecessor-version":[{"id":3192,"href":"https:\/\/pressbooks.bccampus.ca\/businessmathematics\/wp-json\/pressbooks\/v2\/parts\/42\/revisions\/3192"}],"wp:attachment":[{"href":"https:\/\/pressbooks.bccampus.ca\/businessmathematics\/wp-json\/wp\/v2\/media?parent=42"}],"wp:term":[{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/pressbooks.bccampus.ca\/businessmathematics\/wp-json\/wp\/v2\/contributor?post=42"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/pressbooks.bccampus.ca\/businessmathematics\/wp-json\/wp\/v2\/license?post=42"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}