INTEREST I

Simple and compound interest, cash flows and annuities

1. SIMPLE INTEREST

Interest is the money paid for the privilege of borrowing money.

The more money is borrowed (principal), the more interest.

The more time the money is borrowed, the more interest.

The higher the interest rate, the more interest.

The interest rate is expressed as a percentage in this application.

When interest is earned on prior interest in addition to the principal, is called compounded interest. Otherwise is called simple interest.

See the links to learn more.

INSTRUCTIONS

There are four values to zero, in black, in principal, interest rate, time and interest. You must enter three of them and leave the other to zero. Then press the button to calculate the missing value.

2. COMPOUND INTEREST

When interest is earned on the previous interest, besides the capital it is called compound interest.

The present value is the value of an stream of cash flows on the valuation date. On this screen, the cash flows stream is just an initial amount, the principal.

The future value is the value of the principal at the end of the period considered, equivalent to the principal plus the compound interest.

INSTRUCTIONS

There are four values to zero, in black, in principal, interest rate, time and future value. You must enter three of them and leave the other to zero. Then press the button to calculate the missing value.

3. CASH FLOWS

The Net Present Value is the sum of the present values of cash flows over a period of time.

The internal Rate of Return (IRR) of an investment is the interest rate that makes the Net Present Value of all cash flows equal to zero.

The higher is interest rate, the lower is Net Present Value.

INSTRUCTIONS

Enter number of period, amount of cash flow of the period and, only the first time, interest rate, then press the button.

Enter other periods and cash flows. The interest rate will be the same for all the periods.

When you have finished, enter zero for period and zero for amount and the results will be displayed.

If you make a mistake, enter a negative period to delete the last entered period and amount.

4. ANNUITY

An annuity is a series of equal payments made at the end of each period of time.

If payments and time do not change, the higher is interest rate, the lower is annuity present value.

INSTRUCTIONS

There are four values to zero, in black, for payment, interest rate, time and present value. You must enter three of them and leave the other to zero. Then press the button to calculate the missing value.

The payments are made at the end of each period.

5. ANNUITY DUE

An annuity due is a series of equal payments made at the beginning of each period of time.

INSTRUCTIONS

There are four values to zero, in black, for payment, interest rate, time and present value. You must enter three of them and leave the other to zero. Then press the button to calculate the missing value.

The payments are made at the beginning of each period.

6. PERPETUITY

A Perpetuity is an series of periodical equal payments without end.

INSTRUCTIONS

There are three values to zero, in black, for payment, interest rate and present value. You must enter two of them and leave the other to zero. Then press the button to calculate the missing value.