College Math

Selling price = 25 + 1.25 = $26.25 Hence, Emily should sell the furniture for $26.25 2.5 Interest We all make use of money. Sometimes we borrow money, say for our education, and in order to use that privilege, we pay a higher amount in the formof interest. Similarly, when we have surplus money, we lend it or save it in banks or financial institutions, and that money is used by others. We earn interest for this saving and indirect lending. In this section, we shall learn about different kinds of interests. 2.6 Simple Interest Interest on loans generally taken for short term (less than a year) are calculated using simple interest. In other words, the interest is charged on the amount borrowed only and not on any previous or accumulated interest. The amount that is borrowed is known as principal sum . The rate of interest is expressed in percentage and written in decimal format. Time is the time period for which the simple interest is calculated and is denoted in years. Simple interest is calculated using the following formula: ( ) = ∗ ∗ Where, P = Principal Sum r = rate of interest t = time period in years For instance, William took a loan of $6,000 from bank to buy some furniture. He will pay it back over 11 months and his bank charges interest of 8% per year. How much interest will he have to pay? In this case, Principal sum = 6000, r = 0.08 and t = 11/12 Simple Interest = 6000*0.08*11/12 = $440. 2.7 Compound Interest Simple interest is generally calculated for shorter durations, but when we borrow sums for a longer duration (over a year), we make use of compound interest. In the case of compound interest, the interest for succeeding time periods is calculated not just on principal sum but also on the interest of preceding time periods.

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