Simple Interest = Principal × Rate × Time

Examples:
I deposited 400,000 at a bank at an interest rate of 7.5% per year. How much interest will I earn

I borrowed 300,000 from a bank at an interest rate of 12% per year for a 2-year period. How mu

I bought a car for 3,400,000 and had to take a loan of 2,000,000 from a bank at an interest rate of 15% p
have to pay the bank at the end of 3 years?

I made a 3 year investment. The interest rate was 8%. After 3 years, I earned 240,000 in interest.

I got a loan of 470,000 to buy a used car. The interest rate is 7.5%. I paid 105,750 in interest.

Calculate simple interest and compound interest assuming that principal amount is Rs. 10,000; intere

Principal Simple Interest Year End Value

Yr1
Yr2
Yr3
 Compound
Principal Interest Year End Value
Yr1
Yr2
Yr3
 interest will I earn at the end of 3 years?

ar period. How much interest do I have to pay the bank at the end of 2 years?

interest rate of 15% per year for a 3-year period. What is the total amount (interest and loan) that I would

240,000 in interest. How much was my original investment?

05,750 in interest. How many years did it take to pay off the loan?

is Rs. 10,000; interest rate is 9% for three years.

an) that I would
Future Value = Principal × (1 + Rate/t)nt
FV = Principal + Interest

t = times per year

n = no. of years

Examples

Lindsey invests $5000 into an account with 3% per year compounded monthly interest. How muc

You are scheduled to receive Rs. 13,000 in two years.  When you receive it, you will invest it for six

You have Rs. 9,000 to deposit.  ABC Bank offers 12 percent per year compounded monthly, while King Bank offers 12 percent b

You invest Rs. 10,000.  During the first year the investment earned 20% for the year.  During the second year, you earned only

What is the future value of Rs. 26 invested for 32 years at an average rate of return of 7%?
Find the future value of Rs. 100,000 for 15 years. The current five-year rate is 6%.  Rates for the second and third five-year per

I am planning to buy a computer costing 500,000. I'll take a loan for 3 years but I don't want to pay more than 100,
 One time investment

onthly interest. How much will she have after 5 years?

t, you will invest it for six more years at 8 percent per year.  How much will you have in eight years?

hile King Bank offers 12 percent but will only compound annually.   How much will your investment be worth in 10 years at each bank?

he second year, you earned only 4% for that year.   How much is your original deposit worth at the end of the two years?
he second and third five-year periods and expected to be 6.5% and 7.5%, respectively.

't want to pay more than 100,000 in interest. The bank compounds interest monthly. How much should be the interest rate?
 in eight years?

in 10 years at each bank?

he two years?
ould be the interest rate?
FV = C × (1+i)n − 1​

Assume that you invest $1,000 every year for the next five years, at 6% interest.What will be the v

Check Manually Check Conceptually

Beg Balance Instalment Interest End Balance Y5
Y4
Y3
Y2
Y1
-

I want to have Rs. 10 million when I retire in 10 years time. How much will I need to invest every ye

My friend has bought a plot in Bahria Town. She will need to pay Rs. 80,000 every quarter for 5 years. If the interest rate is 12%
expected value of the plot will be 2 million at that time, did she make a good decision?

Using Formula
 Periodic & regular investment

interest.What will be the value of your investment after 5 years?

will I need to invest every year 15% interest?

r 5 years. If the interest rate is 12% and the

 Amount 15,000,000 X0 = 1
Y0 = beginning few
Discount Rate 15% days/weeks of Y1 X1 = X
X2 = X * X
X3 = X * X * X

Yr Date D. Factor Present Value (PV)

Method I Method II Method III
0 Oct-20 1.00000 15,000,000 15,000,000 15,000,000
1 Oct-21 0.86957 13,043,478 13,043,478 1,304,348
2 Oct-22 0.75614 11,342,155 11,342,155 11,342,155
3 Oct-23 0.65752 9,862,743 9,862,743 9,862,743
4 Oct-24 0.57175 8,576,299 8,576,299 8,576,299
5 Oct-25 0.49718 7,457,651 7,457,651 7,457,651
6 Oct-26 0.43233 6,484,914 6,484,914 6,484,914
7 Oct-27 0.37594 5,639,056 5,639,056 5,639,056
8 Oct-28 0.32690 4,903,527 4,903,527 4,903,527
9 Oct-29 0.28426 4,263,936 4,263,936 4,263,936
10 Oct-30 0.24718 3,707,771 3,707,771 3,707,771
11 Oct-31 0.21494 3,224,148 3,224,148 3,224,148
12 Oct-32 0.18691 2,803,607 2,803,607 2,803,607
13 Oct-33 0.16253 2,437,919 2,437,919 2,437,919
14 Oct-34 0.14133 2,119,930 2,119,930 2,119,930
15 Oct-35 0.12289 1,843,417 1,843,417 1,843,417
16 Oct-36 0.10686 1,602,972 1,602,972 1,602,972
17 Oct-37 0.09293 1,393,888 1,393,888 1,393,888
18 Oct-38 0.08081 1,212,077 1,212,077 1,212,077
19 Oct-39 0.07027 1,053,980 1,053,980 1,053,980
20 Oct-40 0.06110 916,504 916,504 916,504
21 Oct-41 0.05313 796,960 796,960 796,960
22 Oct-42 0.04620 693,009 693,009 693,009
23 Oct-43 0.04017 602,616 602,616 602,616
24 Oct-44 0.03493 524,014 524,014 524,014
25 Oct-45 0.03038 455,665 455,665 455,665
26 Oct-46 0.02642 396,230 396,230 396,230
27 Oct-47 0.02297 344,548 344,548 344,548
28 Oct-48 0.01997 299,607 299,607 299,607
29 Oct-49 0.01737 260,528 260,528 260,528
30 Oct-50 0.01510 226,546 226,546 226,546
31 Oct-51 0.01313 196,996 196,996 196,996
32 Oct-52 0.01142 171,301 171,301 171,301
33 Oct-53 0.00993 148,958 148,958 148,958
34 Oct-54 0.00864 129,528 129,528 129,528
35 Oct-55 0.00751 112,633 112,633 112,633
36 Oct-56 0.00653 97,942 97,942 97,942
37 Oct-57 0.00568 85,167 85,167 85,167
38 Oct-58 0.00494 74,058 74,058 74,058
39 Oct-59 0.00429 64,398 64,398 64,398
40 Oct-60 0.00373 55,999 55,999 55,999
41 Oct-61 0.00325 48,694 48,694 48,694
42 Oct-62 0.00282 42,343 42,343 42,343
43 Oct-63 0.00245 36,820 36,820 36,820
44 Oct-64 0.00213 32,017 32,017 32,017
45 Oct-65 0.00186 27,841 27,841 27,841
46 Oct-66 0.00161 24,210 24,210 24,210
47 Oct-67 0.00140 21,052 21,052 21,052
48 Oct-68 0.00122 18,306 18,306 18,306
49 Oct-69 0.00106 15,918 15,918 15,918
50 Oct-70 0.00092 13,842 13,842 13,842
51 Oct-71 0.00080 12,037 12,037 12,037
52 Oct-72 0.00070 10,467 10,467 10,467
53 Oct-73 0.00061 9,101 9,101 9,101
54 Oct-74 0.00053 7,914 7,914 7,914
55 Oct-75 0.00046 6,882 6,882 6,882
56 Oct-76 0.00040 5,984 5,984 5,984
57 Oct-77 0.00035 5,204 5,204 5,204
58 Oct-78 0.00030 4,525 4,525 4,525
59 Oct-79 0.00026 3,935 3,935 3,935
60 Oct-80 0.00023 3,422 3,422 3,422
61 Oct-81 0.00020 2,975 2,975 2,975
62 Oct-82 0.00017 2,587 2,587 2,587
63 Oct-83 0.00015 2,250 2,250 2,250
64 Oct-84 0.00013 1,956 1,956 1,956
65 Oct-85 0.00011 1,701 1,701 1,701
66 Oct-86 0.00010 1,479 1,479 1,479
67 Oct-87 0.00009 1,286 1,286 1,286
68 Oct-88 0.00007 1,119 1,119 1,119
69 Oct-89 0.00006 973 973 973
70 Oct-90 0.00006 846 846 846
71 Oct-91 0.00005 735 735 735
72 Oct-92 0.00004 640 640 640
73 Oct-93 0.00004 556 556 556
74 Oct-94 0.00003 484 484 484
75 Oct-95 0.00003 420 420 420
76 Oct-96 0.00002 366 366 366
77 Oct-97 0.00002 318 318 318
78 Oct-98 0.00002 276 276 276
79 Oct-99 0.00002 240 240 240
80 Oct-00 0.00001 209 209 209
Present Value Examples
Amount in nth year ÷ (1 + Annual discount rate) n

Example 1:
What is the present value of $1,000 received in two years if the interest rate is?

(a) 12% per year discounted annually

Solution: 

b) 12% per year discounted semi-annually

Solution: 

(c) 12% per year discounted daily

Solution: 

Example 2:
You have just won a $1 million lottery.  This new lottery, however, will pay out the
award 60 years from today.  What is the present value of your award based on a 16%
p.a. discount rate?
Solution: 
Example 3:
$7,000 10 years from now at 7% is worth how much today?

Solution

Example 4:
Mr. Nadeem owes a total of $3,060 which includes 12% interest for the three years
he borrowed the money.  How much did he originally borrow?
Solution: 

Example 5:
If we want $2,000 three years from now and the compounded interest rate is 8%, how
much should we invest today?

Solution: 

Example 6:
If you invested $50,000 at one point in time and received back $80,000 ten years
later, what annual interest (or growth) rate (compounded annually) would you have
obtained?
Solution: 

Example 7:
How much would you have to deposit today to have $10,000 in five years at 6%
interest discounted quarterly?

Solution: 
Example 8:
What is the present value of an offer of $15,000 one year from now if the opportunity
cost of capital (discount rate) is 12% per year nominal annual rate compounded
monthly?

Solution: