How Do I Bring Out Finance Charges For Gaining Very Good Profit In Stock Market
Having some knowledge of how to calculate finance charges is always a good thing. Most lenders, as you know, will do this for you, but it can helpful to be able to check the math yourself. It is important, however, to understand that what is presented here is a basic procedure for calculating finance charges and your lender may be using a more complicated method. There may also be other issues attached with your loan which may affect the charges.The first thing to understand is that there are two basic parts to a loan. The first issue is called the principal. This is the amount of money that is borrowed. The lender wants to make a profit for his services (lending you the money) and this is called interest. There are many types of interest from simple to variable. This article will examine simple interest calculations.
The first thing to understand is that there’s one basic parts to a loan. The first issue is called the principal. This is the amount of money that is borrowed. The lender wishes to make a profit for his services & this is called interest. There’s lots of types of interest from simple to variable. This editorial will examine simple interest calculations.
The simple interest formula is as follows:
Interest = Principal Rate Time
Interest = Principal Rate Time
Principal is the amount lent or borrowed.
Rate is the percentage of the principal charged as interest each year.
To do your math, the rate must be expressed as a decimal, so percentages must be divided by 100. For eg, if the rate is 18%, then use 18/100 or 0.18 in the formula.
Time is the time in years of the loan.
The simple interest formula is often abbreviated:
I = P R T
Simple interest math issues can be used for borrowing or for lending. The same formulas are used in both cases.
When money is borrowed, the total amount to be paid back equals the principal borrowed plus the interest charge:
Total repayments = principal + interest
Usually the money is paid back in regular installments, either monthly or weekly. To calculate the regular payment amounts, you divide the total amount to be repaid by the number of months (or weeks) of the loan.
To convert the loan period, ‘T’, from years to months, you multiply it by 12. To convert ‘T’ to weeks, you multiply by 52, since there’s 52 weeks in a year.
Here is an example issue to illustrate how this works.
Example:
A single brother purchases a used automobile by obtaining a simple interest loan. The automobile costs $1500, & the rate of interest that they is being charged on the loan is 12%. The automobile loan is to be paid back in every week installments over a period of one years. Here is the way you answer these questions:
1. What is the amount of interest paid over the 2 years?
2. What is the total amount to be paid back?
3. What is the every week payment amount?
You got: principal: ‘P’ = $1500, rate of interest: ‘R’ = 12% = 0.12, repayment time: ‘T’ = 2 years.
Step 1: Find the amount of interest paid.
Interest: ‘I’ = PRT
= 1500 0.12 2
= $360
Step 2: Find the total amount to be paid back.
Total repayments = principal + interest
= $1500 + $360
= $1860
Step 3: Calculate the every week payment amount.
Every week payment amount = total repayments divided by loan period, T, in weeks. In such case, $1860 divided by 104 weeks equals $17.88 per week.
Calculating simple finance charges is simple four times you have done some more practice with the formulas.
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