Calculate the Due Simple Interest Earned by a Principal of 556.10 (Dollar, Euro, Pound). Annual Interest Rate: 2.25%. Duration Period: 1 year, 4 months and 17 days. Transaction Fee Rate: 0.15%
Calculation method used. Calculation formula. Used notations
[1] Calculation method used: 30 / 360
Number of days in a month
30
Number of days in a year
360
[2] Simple interest. Calculation formula:
I = (P × r × t) ÷ 360
[3] Simple interest. Used notations:
- I = Simple interest amount - To be calculated.
Amount accrued as simple interest on the amount lent, deposited or borrowed. - 360 = Number of days in a year
- P = Principal - initial starting amount lent, deposited or borrowed
P = 556.10 units (Dollar, Euro, Pound) - r = Annual simple interest rate
r = 2.25% - t = Duration period of the investment, in days
t = 1 year, 4 months and 17 days - t = 1 year × 360 days / year + 4 months × 30 days / month + 17 days
t = 497 days
» Simple Interest: what is it, how is it calculated?
Calculate the simple interest amount
[4] Substitute for the values
in the Simple Interest formula:
I =
(P × r × t) ÷ 360 =
(556.10 × 2.25% × 497) ÷ 360 =
556.10 × 2.25 ÷ 100 × 497 ÷ 360 =
(556.10 × 2.25 × 497) ÷ (360 × 100) =
621,858.825 ÷ 36,000 =
17.27385625 ≈
17.27
The Future Value and Project Breakdown
[5] The Future Value (accumulated value) of the investment:
- F = The Future Value of the investment is calculated by adding the calculated simple interest amount to the principal.
- The Future Value of the investment is also called the accumulated value of the investment.
F = P + I =
556.10 + 17.27 =
573.37
[6] Project Breakdown. Monthly
The simple interest is evenly distributed along the months that make up the project
| Month | Days | Interest | Total interest | Balance |
|---|---|---|---|---|
| 0 | 0 | -- | -- | 556.10 |
| 1 | 30 | 1.04 | 1.04 | 557.14 |
| 2 | 30 | 1.04 | 2.08 | 558.18 |
| 3 | 30 | 1.04 | 3.13 | 559.23 |
| 4 | 30 | 1.04 | 4.17 | 560.27 |
| 5 | 30 | 1.04 | 5.21 | 561.31 |
| 6 | 30 | 1.04 | 6.25 | 562.35 |
| 7 | 30 | 1.04 | 7.30 | 563.40 |
| 8 | 30 | 1.04 | 8.34 | 564.44 |
| 9 | 30 | 1.04 | 9.38 | 565.48 |
| 10 | 30 | 1.04 | 10.42 | 566.52 |
| 11 | 30 | 1.04 | 11.47 | 567.57 |
| 12 | 30 | 1.04 | 12.51 | 568.61 |
| 13 | 30 | 1.04 | 13.55 | 569.65 |
| 14 | 30 | 1.04 | 14.59 | 570.69 |
| 15 | 30 | 1.04 | 15.64 | 571.74 |
| 16 | 30 | 1.04 | 16.68 | 572.78 |
| 17 | 17 | 0.59 | 17.27 | 573.37 |
| Month | Days | Interest | Total interest | Balance |
Transaction Fee Amount. Financial Gain (net profit)
[7] Amount charged as a Transaction Fee
- Fee = Transaction Fee Amount is calculated as a percentage of the Future Value.
- This percentage is called Fee Rate = Fee%.
Fee = Fee% × F
Fee =
Fee% × F =
0.15% × 573.37 =
0.15/100 × 573.37 =
(0.15 × 573.37)/100 =
86.01/100 =
86.01 ÷ 100 =
0.8601 ≈
0.86
[8] Financial Gain (net profit):
- Pr = Financial Gain (the net profit) is calculated as the difference between Simple Interest Amount, I, and Transaction Fee Amount, Fee.
Pr = I - Fee
Pr =
I - Fee =
17.27 - 0.86 =
16.41
Calculate the net amount left after deducting the Transaction Fee Amount
[9] Net Amount. Only in the case of a (bank) deposit
- N = The Net Value is calculated by subtracting the Fee Amount from the Future Value.
N = F - Fee
N =
F - Fee =
573.37 - 0.86 =
572.51
Calculate the Total Cost of borrowing
[10] Total Cost. Only in the case of a (bank) loan
- TC = The Total Cost of a borrowing is calculated by adding the Transaction Fee Amount to the Future Value.
TC = F + Fee
TC =
F + Fee =
573.37 + 0.86 =
574.23
Answer:
Principal
556.10
Simple Interest Amount
17.27
Future Value
573.37
Transaction Fee Amount
0.86
Financial Gain (net profit)
16.41
Net Amount
572.51
Total Cost
574.23