Business - How to calculate the ineterest rate on savings and its accrued amount

Tuakana Business 14/06/2018

In class we are learning how to calculate the interest rate on savings

and there accrued amount. We have been learning this for a few weeks

now and I have finally been able to explain how to calculate the interest

rate on savings and there accrued amount.

The first step to doing this, is knowing What is Interest? Interest is money

paid regularly at a particular rate for the use of loaning money or for delaying

the payment of debt. The interest is different to an interest rate because the

interest rate is when a proportion of a loan is charged as an interest to the

borrower, basically adding on top interest.

Secondly we must know what P, R and T stands for, for us to be able to start.

So P stands for Principal, R stands for Interest Rate and T stands for Term.

We must be able to remember these before even starting. Now for example, P

is the principal right and so the principal must be the amount of money borrowed

in a loan or put into a savings account. The R is Interest rate as a decimal  and the

T is for term, meaning the years to pay back.

Now let's start. Let’s say we were given a ( P - $2000, R - 2.5%, T - 5 years ).

We first wanna find the interest rate, you may think its ( 2.5% ) but no it isn’t.

You must divide ( 2.5% by 100 which is 0.025% ). Once we have gotten that,

we then multiply the interest rate by the principal and the Term

( $2000 x 0.025 x 5 ) = 250. After this we add the

( P - $2000 + R- 250 = $2250). Now this is how we find the interest rate on

savings, but we still haven't found the accrued amount. The accrued amount is

like another way of solving this but very different, but it still has the same sum

at the end of it.

Now when trying to find the accrued amount, we must know the number

sentence to solve it which is eg: ( P(1+RT ). It looks very difficult but it aint.

Now so lets say we were given the ( P - $2000, R - 2.5%, T - 5 years ),

exactly the same like the first equation we did. When finding the accrued

amount, it should look like this ( $2000 ( 1 + 0.025 x 5).We first divide

the ( R = 0.25 by 100) = 0.025. After that we multiply the

(I - 0.025 x T - 5 = 0.125 ). After this we add ( 1 + 0.125 ) = 1.125.

Afterwards we multiply the ( P-$2000 x 1.125 ) = $2250. That is exactly the

same sum we got when finding the interest rate on savings, but I have now

shown you both on how to find the interest rate on savings and its accrued

amount.