Fundamentals of Finances

1. Simple interest

The practice of charging an interest rate only to an initial sum (principal amount).

FV = PV*(1+i*n)

PV = FV /(1+i*n)

Alan borrowed $10,000 from the bank to purchase a car. He agreed to repay the amount in 2 years, plus simple interest at an interest rate of 10% per annum (year). What is the total sum Alan has to pay?

2. Compound interest .

FV= PV * (1+i)^n

PV= FV/ (1+i)^n

Alan borrowed $10,000 from the bank to purchase a car. He agreed to repay the amount in 2 years, plus annual compounded interest at an interest rate of 10% per annum (year). What is the total sum Alan has to pay?