Econometrics are mathematical and statistical techniques trying to explain patterns in growth and recession in the economy!
How is econometrics used to test economic theories?
What kinds of graphs might be used in econometrics?
Simple interest is calculated only on the principal amount, or on that portion of the principal amount that remains unpaid.
The amount of simple interest is calculated according to the following formula:
where r is the period interest rate (I/m), B_{0} the initial balance and m the number of time periods elapsed.
To calculate the period interest rate r, one divides the interest rate I by the number of periods m.
For example, imagine that a credit card holder has an outstanding balance of $2500 and that the simple interest rate is 12.99% per annum. The interest added at the end of 3 months would be,
and they would have to pay $2581.19 to pay off the balance at this point.
A formula for calculating annual compound interest is
Where,
Example usage: An amount of 1500.00 is deposited in a bank paying an annual interest rate of 4.3%, compounded quarterly. Find the balance after 6 years.
A. Using the formula above, with P = 1500, r = 4.3/100 = 0.043, n = 4, and t = 6:
So, the balance after 6 years is approximately 1,938.84.
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