4G19:58 O OA. 85%will mature in 6 months.2What's NewACTIVITY 4.1 Simple and Compound InterestA. Fill in the blanks of the table involving a simple interest.PrincipalP8 000P 15 0003)P1 000RateTimeInterest7 months2)4 months1 yr & 3 months5 and a half years 5)1)4.8%P210P 300P 500P 704.5%4)P4 5000.25%B. Complete the table for a compound interest involving P 40 000 loaned for aperiod of 5 years with 6% interest compounded annually.Principal atthe start ofthe yearP 40 000InterestAmount (at the endof the year)1t year40 000 x 0.06 x 1- P 2 P 40 000 +P 2 400 -400.00P 42 400.002nd year3rd year4th year5h yearWhat is ItIn general business terms, interest is defined as the cost of using money overtime. This definition is in close agreement with the definition used by economists,who prefer to say that interest represents the time value of money.Interest is the excess of resources (usually cash) received or paid over theamount of resources loaned or borrowed which is called the principal.If you decided to invest your money in a bank, you will ask the banker howmuch interest you will get. The banker will explain that there are two types ofinterest that would be used to determine the amount of interest that you are goingto receive. Remember that interest is beneficial for you when you are receiving itbut not when you are paying it. So, it is important to know which type of interestwhen deciding where to put your money and where to get the money.3SIMPLE INTERESTSimple interest is the product of the principal amount multiplied by theperiod's interest rate (a one-year rate in standard).Example 1: You invested P 10 000 for 3 years at 9% and the proceeds from theinvestment will be collected at the end of 3 years. Using a simple interestassumption, the calculation will be as follows:

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What's New ACTIVITY 4.1 Simple and Compound Interest A. Fill in the blanks of the table involving a simple interest. Principal P8 000 P15 000 3) P1 000 P4 500 Interest Time 7 months 2) 4 months Rate 1) 4.8% P210 P 300 P 500 P 70 5 and a half years 5) 4.5% 1 yr & 3 months 4) 0.25% B. Complete the table for a compound interest involving P 40 000 loaned for a period of 5 years with 6% interest compounded annually. Principal at the start of the year P 40 000 Interest Amount (at the end of the year) 1 year 40 000 x 0.06 x 1 - P 2 P 40 000 +P 2 400 - 400.00 P 42 400.00 2nd year 3d year 4h year 5 year

What's New ACTIVITY 4.1 Simple and Compound Interest A. Fill in the blanks of the table involving a simple interest. Principal P8 000 P15 000 3) P1 000 P4 500 Interest Time 7 months 2) 4 months Rate 1) 4.8% P210 P 300 P 500 P 70 5 and a half years 5) 4.5% 1 yr & 3 months 4) 0.25% B. Complete the table for a compound interest involving P 40 000 loaned for a period of 5 years with 6% interest compounded annually. Principal at the start of the year P 40 000 Interest Amount (at the end of the year) 1 year 40 000 x 0.06 x 1 - P 2 P 40 000 +P 2 400 - 400.00 P 42 400.00 2nd year 3d year 4h year 5 year

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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