# Mathematics of Investment : Simple Interest

Jul 8th, 2015
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If you borrow a car from a car rental company or if you live in someone else’s house or apartment, you have to pay rent. Like paying rent for the use of a car or a house, you also have to pay rent for the money you borrowed. This is called interest. People like Marco earn by charging interest on loans.

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Mathematics of Investmentby gwapingzz MATHEMATICS OF INVESTMENTSimple InterestIf you borrow a car from a car rental company or if you live in someone elses house or apartment, you have to pay rent. Like paying rent for the use of a car or a house, you also have to pay rent for the money you borrowed. This is called interest. People like Marco earn by charging interest on loans. Banks earn most of their income from the interest that people pay for the amounts they borrow. How much interest one has to pay depends on three factors: the principal, the time and the interest rate.The principal is the initial amount borrowed. For example, if Marco lends Phillip P10,000, that amount would be the principal of his loan. The time, also known as term is the number of units expressed as days, months or years for which the principal was borrowed. In Marcos case, he gives out loans with a term of 6 months. The interest rate or simply rate, is the percentage of the principal amount that the borrower has to pay for a term. For example, to get 5% of P100, multiply P100 by .05. 5% of P100 is P5.00. To get 30 % of P100, multiply P100 by .30. 30% of P100 is P30.00. This is the amount t

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