Cash price = $3695

Deposit =1/3 of $3695 = $1231.67

Loan amount = $3695.00 ? $1231.67 = $2463.33

Total cost of loan = $25.97 × 104= $2700.88

Interest charged = total amount ? loan
I = A ? P
= 2700.88 ? 2463.33
= 237.55

R = (100 x I)/( P x T)

Total cost = deposit + loan + interest
= 1231.67 + 2463.33 + 237.55
= $3932.55

Exact interest, I= prt = $8000 × 0.085 × 90/365 = 167.67

Ordinary Interest, I= Prt = $8000 x 0.085 x 90/360 = 170

I=prt

I=prt

I=prt

With slight modifications, the basic formula can be made to deal with compounding at intervals other than annually.

Since the compounding is done at six-monthly intervals, 4 per cent (half of 8 per cent) will be added to the value on each occasion.

Hence we use r = 0.04. Further, there will be ten additions of interest during the five years, and so n = 10. The formula now gives:

V = P(1 + r)10 = 5,000 x (1.04)10 = 7,401.22

Thus the value in this instance will be £7,401.22.

In a case such as this, the 8 per cent is called a nominal annual

rate, and we are actually referring to 4 per cent per six months.

Let time period of S.I. be T years.

Then for a principal amount, say P,

ATQ, as, S.I. = C.I. for rate =10%p.a. and

time for C.I. = 2(P x 10 x T)/100 = P{[ (100+10)/100 ]2-1}T/10 = [ 110/100 ]2?1 = [(11/10)2?1] = (121-100)/100T/10 = 21/100T = 21/10 = 2.1 years