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Calculation of Interest & Rule 72 Lesson : JAIIB paper 2 Module A of Accounting & Finance for Bankers

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Dear Friends, For JAIIB Paper 2 Accouning and Finance for Bankers ,

We are Now Discussing Module A first lesson / topic such as Calculation of Interest

Simple interest

I= PTr  


where,

 I= interest,
P= principle,
T= time,
r= rate of interest is with decimal      
[ ex. If interest rate is 6% , then ‘r’ will be 0.06. this formula is helpful to make faster calculations than going for traditional  I =  PTR÷100 ]

Compound Interest:

Calculation of Interest & Rule 72 Lesson : JAIIB paper 2 Module A of Accounting & Finance for Bankers


Where,
 A = Amount of money accumulated after n year including interest.
P = Principle (Initial amont)
r = Annual Rate of Interest  [ ex. If interest rate is 9% , then ‘r’ will be 0.09 ]
  n  = No.of Compounding periods
(example :  for compounding annually n=1, compounding halfyearly n=2, compounding quarterly n=4, compounding monthly n=12)


The Rule 72

The Rule 72 is to find in how many years thus amount will be double (whether it is investment/debt)

Ex: A borrowed Rs.100 from B with rate of interest is 6%. Tell us in how many years will it double (you may use rule 72)

To solve this just divide 72 by the rate of interest. 

Here,

   72÷6=12 

so it says that 100 will become 200 with interest in 12 years. This is the use of Rule 72.

In our next post we will discuss Annuities and Present value of Annuity.

Thank you friends . Keep visiting for more updates.

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