Module 2 Financial Math Fresher Lecture 2 S1 2022 SWIN BUR * NE * SWINBURNE UNIVERSITY OF TECHNOLOGY
Simple (flat) Interest Short term investments or loans (money market) i.e., < 1 year Interest is calculated on the original amount borrowed or invested (principal) i xn I = Px 100 Where I = interest amount P= principal, i effective rate of interest and n = time Interest has been consumed or not reinvested. 2 SWIN BUR . NE .
Example I have borrowed $2000 for 90 days at 4.25% simple interest. How much do I owe at the end of the 90 days? P = 2000, i = 4.25 and n= 90/365 The amount I owe is the principal and the interest i.e., $2020.96 I = 2000× 100 4.25 = 90 ´ 20.9589 365 3 SWIN BUR · NE .