INTEREST 



3011 



INTEREST 



7 mo. 12 da. = ^ yr. = 3% yr. 

 1.2 



4 mo. 10 da. = 



12 



6 mo. 6 da. = yr. = 3l / ^ yr. ' 



8 mo. 20 da.=-^ yr.=i$is yr. 

 Find the interest on $12,800 for 8 mo. 20 da. at 



41/2%. 



Prin. = $12, 800 

 Rate = 41/2% 

 ' Time = 8 mo. 20 da. 

 Int. =i% 8 X.04i/ 2 X$12,800 

 Int. =.03i / 4X$12,800 = $416. 

 (6) The 6% Method. The interest for one year 

 on any principal at 6% is .06 of the principal ; for 

 one month it is (}i 2 of .06 or .005) of the prin- 

 cipal ; for six days it is (i/ of .005 or .001) of the 

 principal ; for one day it is (i/ 6 of .001 or .000%) 

 of the principal. 



Put into more concise form, we have : 

 Int. for 1 yr. =.06 of Prin. 

 Int. for 1 mo. = .005 of Prin. 

 Int. for 6 da. =.001 of Prin. 

 Int. for 1 da. =.000% of Prin. 

 Using this method, find the interest on $1600 

 for 3 yr. 4 mo. 24 da. (1) at 6%. (2) At 7V 2 %. 

 (3) At 51/3%. 

 Solution : 



(1) Prin. = $1600 

 Rate = 6% 



Time = 3 yr. 4 mo. 24 da. 

 Int. = (.18+.02 + .004) X$1600 

 Int. =.204X$1600 = $326.40 



(2) Interest at 6% is $326.40 ; interest at 71/2% 



is -j~ or 1/4 greater. 

 Solution : 



Int. at 6 % = $326.40 



Int. at li%= 81.60 (1/4 of $326.40) 



Int. at 7V 2 %= 408.00 



(3) Interest at 51/2% is ^ or % 2 less than at 6%. 



o 

 Solution : 



Int. at 6 % = $326.40 

 Int. at %%= 27.20 (i/ 12 of $326.40) 

 Int. at 5i^%= 299.20 



(c) The Thousand-Day Method. This "is a 

 clear, simple method which should be more widely 

 known. It lends itself to any interest problem. 

 It is based upon the fact that any principal put 

 on simple interest at 36% will double itself in 1000 

 days; for example, the interest on $800 at 36% 



1 80 

 for 1000 days is 1009^ X .^ X $$3 = $800.00, or 



i 



the interest is equal to the principal. 



(1) Find the interest on $500 at 6% for 2 yr. 

 6 mo. 18 da. 

 Solution : 



The interest at 36%- for 1000 days is $500. 

 2 yr. 6 mo. 18 da. = 918 da. or 91 %ooo of 1000 

 days. 



Int. for 1000 da. at 36% = $500 



Int. for 918 da. at 36%=9i% ooX $500 



Hi*S5* =4 59 .ooo 



Int. for 918 da. at 6% = -i-jj =$76.50 

 From the above may be seen the rule called the 

 "1000 day rule" : Multiply the principal by the 



number of days, and point off three decimal 

 places, that is, divide by 1000, and the result is 

 the interest for the given time at 36%. Then 

 from this result find it for 6% by taking % of the 

 result; at 4% by taking % of the result; at 3% 

 by taking i/ 12 of the result ; at 4%% by taking % 

 of the result, and so on. 



To Find Rate. At what rate will $16,500 yield 

 $1,815 interest in 2 yr.? 



Solution: 



Int. for 1 yr. = * =$907.50 



Rate 



907.50 



=.051,2 



"16500 



(Rate means the part one year's interest is of 

 the principal.) 



To Find Principal. What principal at 5i, 2 % 

 will yield $907.50 interest in 4 years? 

 Solution : 



Int. for 4 yrs.= (4X-051/2 or .22) of Prin. 

 $907.50 = .22xPrin. 



Number of yrs.=- 



To Find Time. In what time will $450 give 

 $68.40 interest at 6%? 



Int. for 1 yr. = .06x$450 = $27.00 

 $68.40_ 

 ?27.00 9l5 

 4 



mo. = 6% mo. 

 5 

 Time= 2 yr. 6 mo. 18 da. A.H. 



INTEREST (!N ECONOMICS). When a per- 

 son does not spend all he earns, he accumu- 

 lates money which is .called capital. This capi- 

 tal can be very useful in developing new in- 

 dustries or in aiding people temporarily in 

 need of financial help. Because the man sav- 

 ing money has denied himself what his money 

 could give him and because he helps others 

 to produce, he is entitled to a certain financial 

 return from his loans. This return or premium 

 is called interest, from the Latin interesse, 

 meaning to influence. 



Economic View. In the study of economics 

 three views or theories of interest are the 

 most prominent; these are abstinence, produc- 

 tivity and exploitation. The abstinence theory 

 holds that the lender earns his interest for ab- 

 staining from spending the money in an unpro- 

 ductive way. The productivity view points 

 out that in producing anything, money or capi- 

 tal is as necessary as labor, and therefore de- 

 serves a sort of wages known as interest. The 

 exploitation theory, very popular among So- 

 cialists and various organizations, declares 

 labor the only source of wealth, and interest 

 simply a tax collected by capitalists because 

 they have the power to stop industries by not 

 circulating their money. It should be remem- 

 bered that in business when a man possessing 

 capital invests it in an industry he practically 

 lends it to that enterprise, even if he himself 

 owns and manages the factory or shop. Such 



