Loans And Mortgages; Simple Annual Interest; Continuous Compounding - HP 10BII Owner's Manual

Loans and Mortgages
Simple Annual Interest
Example. Your good friend needs a loan to start his latest enterprise and
has asked you to lend him $450 for 60 days. You lend him the money at
10% simple annual interest, to be calculated on a 365-day basis. How
much interest will he owe you in 60 days, and what is the total amount
owed?
This equation is used for calculating simple annual interest using a 365
day year:
INTEREST =
LOAN AMOUNT x INTEREST% x TERM OF LOAN (IN DAYS
365
Keys: Display: Description:
@OOMSOO®
0.10
Stores interest.
GXeXOCGXSXe GG 740 Calculates interest owed.
QMO
457.40
Calculates total owed.
Continuous Compounding
The equation for calculating an effective rate for continuous
compounding is:
EFF% = (еМ 1) x 100
To solve а continuous compounding problem complete these steps:
1. Compute the annual effective rate using the above equation.
2. Either use this effective rate in your calculations with an annual
period (P/YR = 1) or convert this rate so that it applies to your
payment period. In the following example, P/YR = 12 so you have
to calculate a new NOM% using the interest rate conversion
application with P/YR equal to 12.
98 68: Additional Examples