bel final presentation
TRANSCRIPT
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Fee charged for the use of money
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Simple Interest
Compound Interest
Bank Discount
Types of Interest
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Inability to cope with the rising amount of
interest. Example: Credit card No knowledge on how loans work
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Study how loan payments are constructed
Study the relationship between length of
payment and interest
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= (1 )
=
t =
Grow arithmetically
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RM1000
Simple Interest First Year Second Year
RM1000
RM1000
Assume interest, i = 6%
RM60 RM60
RM1000 RM1060 RM1120
RM60
Bring Forward
The amount is multiplied by interest rate
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= (1 )
=
t =
Growth geometrically
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RM1000
Compound Interest First Year Second Year
RM1000
RM1000
Assume interest, i = 6%
RM60 RM60
RM1000 RM1060 RM1123.60
RM3.60
RM60
Bring Forward
The amount is multiplied by interest rate
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=
(+)
= (1 )
d =
t =
Charged at the beginning
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RM1000
ank Discount First Year Second Year
RM1000
RM1000
Assume interest, i = 6%
(RM56.60)
RM1000 RM943.40 RM886.80
Therefore,
=6%
1 6 %
= .0566
(RM56.60)
(RM56.60)
Bring Forward
The amount is multiplied by discount rate
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Grow your money
Reflect the cost of borrowing
Both total interests in the
first period are the same.
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1
t
1 1 = (1 )
A(t)
Compound Interest
Simple Interest
0
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Short term accounts or loans
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THEDISSIMILARITIESBETWEEN SIMPLEINTEREST & COMPOUND INTEREST
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SIMPLE INTEREST COMPOUND INTEREST
Arithmetic growth Geometric growth
Interest calculated is based on the
initial principal
Interest calculated is based on:
Latest principal = previous principal +
latest interest
the interval of period consist of shortterm investments (term < 1 year)
the interval of period consist of longterm investments( term > 1 year)
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THE DISSIMILARITIES BETWEEN SIMPLE
INTEREST & BANK DISCOUNT
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SIMPLE INTEREST BANK DISCOUNT
DISSIMILARITIES
Interest is paid on the date of due (at
the end of each period) using interestrate(i)
Interest is paid on the date of issue(at
the beginning of each period) usingdiscount rate (d)
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Recommendation 1all payments
made on time
All payments be made
promptly
Pays more
Recommendation 2to study the type
of loan to be taken
Look up the type of
loan
Recommendation 3to finance loan
with lower term of
payment
The lower the term
the lower the interest