Grade 12 Financial Maths Lesson 1 | Simple interest | Higher Purchase Agreements | Mlungisi Nkosi #Finance

good day everyone and once again we are back together and for the moment uh you know our systems are still giving us a little bit of a problem so we are using this alternative method but uh of course if you haven’t subscribed please just make sure that you hit that subscribe button

and today we are starting with financial mathematics i’ve really been looking forward to this section and um i’m going to just dive right in and talk about simple interest okay so um so just keep in mind when we talk about simple interest uh in this case first of all let’s talk

about just the financial mathematics part of it right we’ve got this formula that we use okay and essentially um the a part stands for what we call the accumulated amount and don’t worry we’re going to explain all of that as time goes on so this is the accumulated amount okay and

this is the principal amount so this is the amount that you either would have borrowed or your initial investment or um you know just the amount that you put in at the beginning and i stands for the interest rate okay so that’s the interest rate so uh usually that is calculated per annum or

per year right nm and payet are exactly the same thing right um so we calculate the interest rate now there’s a difference between interest and interest rate but we’ll talk about that later on right and then and this would represent the number of years uh in this case um obviously if

it’s a Loan that is taken over or should be paid off of over a period of two years then n will be two and so the cookie crumbles right now uh let’s talk first of all what is interest or in this case yeah let’s talk about interest first so remember interest is you

know just the amount or you know the cost of borrowing money or it’s the amount that is charged for borrowing money okay um or you can just simply say in in this case you know it’s it’s the amount of money um that is added on to the principal or the the initial amount that is

either owed or that is invested okay so in the case of interest um we’ve got uh in this case uh two types of ways in which you know that interest is uh taken you can take the interest over a lump sum and so it means that you know you take the interest in a in the total amount so in this case

you can just add on to the total amount or the you know the sum of money that is either invested or borrowed and in this case that is what we call simple interest okay right so in that case um where do we use this uh simple interest in most uh cases so they might give you either an investment or in

this case it might be a Loan that is given and they should actually tell you in this case that it’s simple interest or sometimes we may even talk about a higher purchase agreement now i want you to please note once they start talking about higher purchase agreement uh in this

case you immediately should assume assume that we are going to apply simple interest okay and in in the case of a higher purchase agreement you know um you know interest is usually charged um you know or calculated rather as simple interest in this case uh on the full amount of you know that is

either Loaned or that is uh invested right or in in the case of higher purchase rather it’s a it’s amount and it’s an amount rather that is Loaned right so in this case uh usually you know you take a higher purchase agreement for you know

short-term Loan such as you know you can buy cars you can buy furniture or even appliances whatever the case may be right what i just want you to please note is that whenever we take simple interest we are going to be simply simply rather uh talking about um when we’re

talking about higher pitches rather we are going to be talking about simple interest so what i want us to do is i want us to quickly jump into an example and let’s see how to apply these principles all right now let’s take our very first example so they tell us about cabello who invests

120 000 with the bank the interest at the end of each year was withdrawn and used to pay for her annual holiday okay so they say at the end of 12 years she withdrew her final interest payment as well as her initial deposit right now they want us to calculate the amount of money withdrawn from her

account over the 12 years if the bank paid 9 interest per annum right so now in this case of course we would be talking about simple interest the reason for that i mean if you think about it uh all that she simply does um is that she withdraws the amount so it will be in it the interest rather will

be charged on the Capital amount that she uh has invested right so in this case all right now let’s have a look at it um what do we have we’re going to first of all we’ve got uh the we want the value of a right in this case we wanted the total amount of money

withdrawn from her account over the 12 years right so we’re going to talk about the accumulated amount in this case but what is our principal amount remember they told us that she invested an amount of 120 000 right so that’s going to be 120 000 okay and in this case they told us that

the interest rate now please i want you to always note interest rate is measured as a percentage so that will be 9 but remember you divide that by 100 so that will be 0.09 okay and of course um in this case we wanted we wanted the total amount that is withdrawn from her account and please remember

so what she does is that she invested this amount and every single year she withdraws the interest right and so what is left in the account is still the 120 that was initially even invested right so it means in this case we’re going to apply a simple interest formula say a is equals to p one

plus i times n okay so we know the principal amount this time was a hundred and twenty thousand okay that’s one plus in this case the interest rate is 0.09 and we said we multiply that by 12 okay right so we quickly going to just slot that into our calculator okay so we’ve got 120 000

into one plus 0.09 times 12 and we get an amount of 249 1600 rents okay now i want you to please note what was the question okay they wanted to uh to know the total amount of money that she has withdrawn right so in this case i want you to note that um the amount accumulated turn uh to 246 uh or

rather 249 600 rents okay right um what you also could have done um is to say well look uh in this case then okay so let’s calculate the interest per year right so how you could have also done this is to say well how much interest would actually accumulate in one year right so you can look at

interest in one year i’m just showing you an alternative way of calculating this right you can say well in this case i know in one year it’s a hundred and twenty thousand multiplied by the interest for one year in this case so in this uh we’ve got 0.09 right so if you calculate

that 120 000 multiplied by 0.09 in this case that gives us 10 800 trends right so that’s 10 800 so in this case that simply means 10 800 is the amount of interest in one year right but in this case remember that how many years did she actually withdraw this amount she would drew this amount

for 12 years so i can say well the interest charged over 12 years would actually be 12 multiplied by 10 800. for each year right and obviously if you multiply that by 12 i get an amount of 120 9600 but now please consider that at the end of the term right at the end of 12 years they told us that

she withdrew right and she would do the final interest payment as well as the initial deposit so she withdrew the the interest payment plus the deposit so the total in this case um so the total amount that was withdrawn within the 12 years would be the interest amount plus the principal amount in

this case that would be 100 129 600 plus the principal amount in this case was 120 000 rents and so uh you’ll get exactly the same value which is at 249 600 rents i hope that does make sense in terms of simple interest okay now let’s take the next question they say to us calculator the

total interest earned over the 12 year period okay i think we’ve kind of done that okay in the previous one in the previous example so as we said if you wanted to find out the interest for a one year in this case it would have been 10 800 so you can just multiply that by 12 like we did

previously or alternatively please i want you to note this if we followed that method remember this is what the amount of 120 has accumulated too that 249 is what it has accumulated to so to calculate the interest it would be the accumulated amount minus the principal amount and so that amount

would be the interest so in this case would be 249 600 minus a 120 000 rents and in this case that will give you a hundred and twenty nine thousand and six hundred rents okay so that is uh that is the amount of interest that she has collected over the period of um uh uh yeah the period of 12 years

okay right now let’s take another example in this case and that would illustrate this point a little bit further all right so on our second example right as i did say to you that whenever we talk about higher purchase agreement uh in this case you would have um you know simple interest

applying there right so now they say gea gia buys a tv set for 3500 so this is the principal amount obviously that in a sense she borrows they say on higher purchase on a higher purchase agreement the interest charged is 10 percent per annum right based on the full purchase price of the set she

repays the Loan over three years so that’s important for us to note that you’ll notice all the important information i always kind of highlight in a sense so that i know what i’m dealing with right now so they say calculate the total amount of money that she must

repay so remember that as much as she in a sense borrowed 3500 she bought a tv set okay for 3500 so they are going to charge her interest that is the amount the cost of borrowing money right um in this case so we’re going to say all right um it’s the accumulated amount because we know

that we are dealing with simple simple interest okay so it’s going to be 1 plus i times n so in this case we’ve got 3 500 1 plus in this case our interest rate okay please note the difference between interest amount and the interest rate so our interest rate is 10 percent per annum so

that would be 10 divided by a hundred remember interest rate you always say that amount divided by 100 and so that gives us 0.1 so interest rate is 0.1 multiplied by the number of years and remember that n was given as three years right so in this case we know that n is three and uh so uh if we put

that in our calculator um perhaps i should actually download one so that you can see as i calculate okay so i get an amount of 4550 rents okay so that is the total amount that she must repay back okay right and then the second question says how much will she have to pay each month if she makes

equal payments every month now remember she owes a total of four thousand five hundred and fifty okay so in this case what’s going to happen if she wants to divide that into monthly installments um in this case we need to find out how many months are there in three years okay so the number of

months would simply be remember in one year you’ve got 12 months and of course in three years that would be 12 times 3 and that would be 36 right so to calculate the installments uh that she’d have to pay so the amount or the installments that she’d have to pay would be the total

amount that is 4550 divided by 36 right so in this case all we do is to divide that by 36 and what you will have to pay is a hundred and twenty six thousand and thirty nine cents okay i don’t know not a hundred and twenty six thousand rather it’s a hundred and twenty six rents and

thirty nine cents okay right um i want to leave my lesson here okay and obviously we’re going to be talking about compound interest next okay uh so please just don’t forget to subscribe we’re still going to and i’m going to actually make sure that you guys excel in this

section of mathematics we’re still going to talk about Loan repayments and and all of that so for those of you who have not yet you know subscribe please just make sure that you make this channel your go-to place when it comes to mathematics and physical science otherwise

i’ll see you guys next time