MATH 125 Lecture 28: Ch 4.6
Document Summary
Suppose you invest an amount p in dollars (called the principal ) at the interest rate of r percent, called the nominal rate of interest. Out of 100 , so for example 5% interest corresponds to r = 5/100 = 0. 05, 10% corresponds to r = 10/100 = 0. 1, and 100% corresponds to r = 100/100 = 1. Simple interest means that the interest is calculated once per year, so an original investment of p dollars becomes p + rp = p (1 + r) dollars at the end of the year. For example, if p = and r = 10% then at the end of one year your investment is worth 1000 + (0. 1)1000 = 1000(1. 1) = 1100 dollars. P dollars invested for one year with simple interest at a nominal rate of r percent will have increased to p (1 + r) dollars at the end of the year.
