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    Interest, Annuities, and Amortization.

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    Please provide the formulas and 2 solved examples using the formulas for each of these topics:

    Simple interest
    Compound interest
    Future value of an annuity
    Present value of an annuity
    Amortization

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    https://brainmass.com/business/interest-rates/interest-annuities-amortization-286466

    Solution Preview

    Please provide the formulas and 2 solved examples using the formulas for each of these topics:

    Simple interest (I) = Prt
    Where:
    P is the principal amount
    r is the annual rate
    t is the time in years.

    Examples:

    1. Suppose you locate a two-year investment that pays 14% per year. If you invest $325, how much of this is simple interest?

    I = Prt = (325) (0.14) (2) = $91.
    2. Mary invest $4,000 for 3 years at 5% per year. How much of this is the simple interest?

    I = Prt = (4,000) (0.05) (3) = $600.

    Compound interest:

    A = P (1 + r)n
    Total interest earned: A - P.
    Therefore, compound interest is total interest - simple interest.

    Where:
    A is the amount of money accumulated after n years, including interest.
    P is the principal (the initial amount you borrow or deposit).
    r is the annual rate of interest (percentage).
    n is the number of years the amount is deposited or borrowed for.

    Examples:
    1. In the previous example (number 1), how much is compound interest?

    A = 325 (1 + 0.14)2 = $422.37
    Total interest earned: $422.37 - $325 = $97.37
    Therefore, compound interest is $97.37 - $91 = $6.37
    2. In the previous example (number 2), how much is compound interest?

    A = 4,000 (1 + 0.05)3 = $4630.50
    Total interest earned: $4630.50 - $4,000 = $630.50
    Therefore, compound interest is $630.50 - $600 = $30.50

    Future value of an annuity (FVAN) = PMT [((1 + I)N - 1) / I]

    Where:
    PMT is the annual fixed payment.
    I is the ...

    Solution Summary

    This solution is comprised of detailed explanation and step-by-step calculation of Simple interest, Compound interest, Future value of an annuity, Present value of an annuity, and Amortization.

    $2.19