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CPTSuccess Revision Notes – Quantitative Aptitude Chapter 4. Simple and Compound Interest including Annuity – Applications
Chapter 4. Simple and Compound Interest including Annuity – Applications ,[object Object],Time value of Money Opportunity Cost Inflation Liquidity Preference Risk Factor ,[object Object]
Interest – is the price paid by a borrower for the use of a lender’s money
Principal – is the initial value of lending
Rate of Interest – the percentage rate at which the interest is charged for a defined length of time for use of principal
Accumulated Amount – is the final value of an investment© Revision Notes – Quantitative Aptitude CPTSuccess www.cptsuccess.com
Chapter 4. Simple and Compound Interest including Annuity – Applications ,[object Object],I = P.I.t A = P + I = P (1 + i.t) I = A – P  Where  A = Accumulated Amount  P = Principal  i = annual interest rate in decimal I = Amount of Interest t = time in years © Revision Notes – Quantitative Aptitude CPTSuccess www.cptsuccess.com
Chapter 4. Simple and Compound Interest including Annuity – Applications ,[object Object],An = P (1 + i)n where,	 i = Annual rate of interest  / Number of conversion periods per year 	n = number of periods 	An = Accumulated Amount 	P = Principal   Compound Interest = An – P = P [(1+i)n – 1] © Revision Notes – Quantitative Aptitude CPTSuccess www.cptsuccess.com
Chapter 4. Simple and Compound Interest including Annuity – Applications ,[object Object],I = P.E.T. Where 	I = amount of interest 	E = Effective rate of interest in decimal 	T = time period 	P = Principal Amount   E = (1+i)n – 1 © Revision Notes – Quantitative Aptitude CPTSuccess www.cptsuccess.com
Chapter 4. Simple and Compound Interest including Annuity – Applications ,[object Object],  ,[object Object]
 Amount paid (received) must be constant over the period of annuity, and
 Time interval between two consecutive payments (or receipts) must be the same© Revision Notes – Quantitative Aptitude CPTSuccess www.cptsuccess.com
Chapter 4. Simple and Compound Interest including Annuity – Applications ,[object Object],© Revision Notes – Quantitative Aptitude CPTSuccess www.cptsuccess.com
Chapter 4. Simple and Compound Interest including Annuity – Applications ,[object Object],Future value is the cash value of an investment at some time in the future. 	F = C.F. (1 + i)n 	where 	F = Future Value 		CF = Single Cash Flow © Revision Notes – Quantitative Aptitude CPTSuccess www.cptsuccess.com
Chapter 4. Simple and Compound Interest including Annuity – Applications ,[object Object],If A be the periodic payments the future value A(n i) of the annuity is given by 	A(n i) =  ,[object Object],Calculating the future value of the annuity due involves two steps ,[object Object]

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Quant04. Simple and Compound Interest Including Annuity – Applications

  • 1. CPTSuccess Revision Notes – Quantitative Aptitude Chapter 4. Simple and Compound Interest including Annuity – Applications
  • 2.
  • 3. Interest – is the price paid by a borrower for the use of a lender’s money
  • 4. Principal – is the initial value of lending
  • 5. Rate of Interest – the percentage rate at which the interest is charged for a defined length of time for use of principal
  • 6. Accumulated Amount – is the final value of an investment© Revision Notes – Quantitative Aptitude CPTSuccess www.cptsuccess.com
  • 7.
  • 8.
  • 9.
  • 10.
  • 11. Amount paid (received) must be constant over the period of annuity, and
  • 12. Time interval between two consecutive payments (or receipts) must be the same© Revision Notes – Quantitative Aptitude CPTSuccess www.cptsuccess.com
  • 13.
  • 14.
  • 15.
  • 16. Step 2: Multiply the result by 1 + i© Revision Notes – Quantitative Aptitude CPTSuccess www.cptsuccess.com
  • 17.
  • 18.
  • 19.
  • 20.
  • 21.
  • 22.
  • 23. Valuation of BondsA bond is a debt security in which the issuer owes the holder a debt and is obliged to repay the principal and interest. Present value concept helps to decide whether or at what rates bonds should be purchased to achieve a specified rate of return. © Revision Notes – Quantitative Aptitude CPTSuccess www.cptsuccess.com