welcome to lectern line our first topic in Finance math is going to be simple interest so what we mean by simple interest well it’s the type of interest
that’s not found very much anymore because you don’t earn as much as when you have compounded interest but it’s still a concept we need to understand so before we do that let’s go over some basic concepts here P stands for principal principal is the initial amount of money
that you will invest so if you have a thousand dollars you want to put in the bank you don’t know a lot of money these days but there was a time where we earned a fair amount of money in the bank you want to put in the bank to earn some interest that’s your principal that’s your
principal investment interest is the amount of money that you get in return for that the bank will pay you money and that’s called interest you will earn interest and so the units for interest is dollars not to be confused with the interest rate we’ll get to that in just a moment a
stands for accumulated amount the total amount that you end up with will be the initial principal you put in the bank plus whatever interest you earn on top of that so the two combined will form the accumulated amount so the more interest you earn the bigger the accumulated amount which is added to
the initial principal investment that you made next is called our four rate that’s called the interest rate usually expressed in percent or in decimal so that’s how fast you’ll be accumulating interest it’s based upon the rate and of course about how much you invest as well
but if the rate is high ulam you’ll get more interested in the rate is slow you’ll get less interest so usually it’s like 1% or 2% or 3% so for every year that you put your money in the bank that will give you some money back and it’s in terms of what percent of your
principal will they pay you and that’s called the rate and finally the time and usually it’s expressed in years how long will you put your investment in the bank if you put it in for one year you’ll earn interest for a year if you put in for two years you’ll interest for two
years simple as in simple interest means that you put it in and then at the end of the period that will give you the interest and it will not pay you interest on the interest that you’re earning along the way that’s the difference between simple interest and compounded interest so if
you leave it in for three years years after three years they’ll say well you turned in you put in a thousand dollars in the bank you get this rate and after three years to get this much money and they don’t pay you on the interest that you’re earning while the money is in the bank
it’s not as lucrative so therefore the compounded interest rate is the one that’s most used most most of the time used because it is a more advantageous way of earning money we’ll get to that in a later CashNews.co so definition of interest mathematically the amount of money that
you get back for investing your principal it’s equal to the principal you invest times the rate at which is invested at times the amount of time that you leave it in the bank or in the investment so it’s principal times rate times time will give you interest earned the result is in
dollars the accumulated amount is the amount that you end up with at the end which is equal to the principal you invested which of course you’ll get back plus any interest that you earned and since the interest that we earned is going to be equal to PRT from our definition we can then factor
out a P the principal so that means the amount the accumulated amount will be the principal times the quantity one for the initial principal plus the rate times the time alright so here’s an example here let’s say that we’re going to invest two thousand dollars at five percent
interest rate and we do it for three years but it’s simple interest which means that the interest that you’ll earn I which is equal to the principal times the rate times the time which is going to be equal to two thousand dollars times the rate which is five percent so that will be 0.05
times the time which is three years so what is the total amount let’s see here five percent on two thousand dollars is that would be a hundred dollars times three so that would earn you three hundred dollars after three years after three years you would get your two thousand dollars back they
will pay an additional two three hundred dollars so what would be the accumulated amount so since the accumulated amount is equal to the principal plus interest so in this case the principal will be two thousand dollars that’s the initial investment plus the three hundred dollars that you
earn an interest after three years which is equal to two thousand three hundred dollars which will be the accumulated amount that you’ll end up with after three years okay so quick check let’s stand up 100 times three three hundred that looks correct so that’s the concept of
simple interest it’s very straightforward this is how you see how you calculate the interest earned what we mean by accumulated amount and then here’s a nice little example to show you how to do that
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Ex. Monopoly, crosswords,soduku,etc.
I'm I the only 13 year old girl who really understand everything
H
Yoo bro thanks for this i want to be a entrepreneur i am 14 any advice for learning?
It’s 1 in the morning and I’m up taking notes
If you explain the acronym as P I R A T you get pirate
explain more
this video just taught me everything my teacher has been struggling to teach me for three weeks !! i’m so happy !!!
Mehn I am so grateful sir
Keep up the good work greatly appreciated
Great! 😂
So.more money and more time means more interest.
Hello, I have a question: If I have a loan worth 5,000,000 for a period of 5 years, it is consumed at an interest rate of 9 percent annually through fixed amortizations (every year we pay off the principal of the loan 5,000,000/5 = 1,000,000). Is there a difference in the loan amortization schedule if the interest is simple and if the interest is compounded? Or there is no difference as long as the interest is paid at the end of each year. Please respond. Thank you
Dude idk how to put it but by the end of the video everything clicked and I felt like I was so smart 😂 thank you so much
gardaş çok zor la
hahahaha
business math
Thank you for tasking sir your lecture is very well
You managed to help me perfectly understand this with a very limited knowledge of math 😂
He talks too fast
next year i have finance math. might use these videos as a way to undrstand the equations, math for class. you are awesome. at what you do. !! 😀😀
Thank for the video it is very helpful
So, it's like algebra?
Needed that, I'm goin to subscribe! Much love from Bangladesh
Thank you so much
could you please explain why 5% is 0.05?
worth watching
Nice sar
This is the kind of math I wish I'd been offered in high school, instead of garbage math like algebra and pre-calc. This is stuff you can actually use on the day to day.