MATA32H3 Lecture Notes - Leap Year, Annual Percentage Rate, Nominal Interest Rate

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29 Sep 2013
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MATA32H3 Full Course Notes
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Mata32 september 6: 5. 1, 5. 2: investments, compound interest, and value: when money is invested, one expects to earn interest on the investment. The length of time is the interest period. (eg. 3 months -quarterly, semiannually, annually) It is the fraction of the principal that is added back to the principal at the end of a period. The value of an investment today is . 00. The negotiated interest period is 2 months and the periodic rate is 1%. What is the value of the investment in 4 months. 4 months - 2 interest periods will pass. After 1st 2 month period: new value = old value + (old value x 0. 01) After 2nd two month period: new value = old value + (old value x 0. 01) Let s = value of the investment after n periods (compound amount or accumulated amount or. After 1 period value is p + pr = p(1+r) After 2 periods value is p(1+r) + p(1+r)r.

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