Economics

Question 1

What is simple interest?

Answer 1

-interest paid on the principal only
-I = Pni
-P = principal or present value
n = number of interest periods
i = interest rate per period

Question 2

Formula for simple interest future value

Answer 2

-S = P + I
-S = P(1+ni)

Question 3

Formula for ordinary annuity present value

Answer 3

P = R ( ( (1+i)^n - 1 ) / ( i (1+i)^n ) )

-where R = periodic payments
- payment occurs at the end of each period

Question 4

Effective rate per year

Answer 4

ie = (1 + in/m)^m - 1

-where in = nominal interest
m = periods per year
- m = 2 semi annual, 4 quarterly, 12 monthly, 360 daily, 1 annual, 6 bimonthly

Question 5

Formula for compound interest future value

Answer 5

S = P(1+i)^n

Question 6

Formula for ordinary annuity future value

Answer 6

S = R ( ( (1+i)^n - 1 ) / i )