# Interest

### Simple interest rate

The interest period is usually one year, as in the case of interest rates on deposits and loans given by banks.

The decimal form of percentage is used to calculate interest rates:

if the interest rate on a deposit is 2,5%

• the interest rate (in euros) is calculated using 0,025

• when calculating the new, increased amount of the deposit, 1,025 is used in the calculations.

Example 1. What is the interest in euros on a deposit of €1500 when the interest rate on the account is 3,15%? Example 2. How much does a deposit of €1500 increase in a year when the interest rate for the account is 3,15%? ### Interim interest

When a deposit is in an account for less than the interest period (i.e. usually less than a year), it is possible to speak of interim interest.

When the interest period is less than one year, the calculation of the interest must take into account how long the interest period relative to the whole year.

Example 3. The interest rate on an account is 4,0% and the deposit is €100. The interest rate on the one-year deposit is

## In one year ## In 6 months ## In 8 months Sometimes, it is necessary to calculate the actual number of interest days. Such situations include, for example, calculating penalty interest. The calendar days (January 31, February 28, March 31, etc.) are included in the calculation of actual interest days. Note that when calculating the actual interest days, the first day (for example, the due date of the invoice) is not included.

Example 4. The due date for a phone bill was 12th January. However, the bill, which amounted to €35,55, could not be paid until 3rd February. How much is the penalty interest when the penalty interest rate is 12,0%?

The number of interest days in January (note: the first interest day is January 13th) is a total of 19 days and in February, 3 days.

There are a total of 22 interest days. Amount of penalty interest is €0,26.

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### Exercises

1. How many actual interest days are when the interest period is from

a) 17.2. - 11.9.

b) 15.3. - 15.9.

2. What is the interest in euros on a deposit of €6380 if the interest rate on the account is 2,75% and the deposit period is from 31.12. - 30.6.?

3. How large does the deposit of €25 000 increase in a year, when the interest rate is 5,0%?

4. €150 will be deposited per year into an account with an interest rate of 1,70%.

a) Calculate how much interest is paid on the deposit.

b) How much can be withdrawn from the account after one year?

5. See the expression below Which of the following statements is correct?

A) €1000 has been deposited into the account for four months.

B) €1000 has been deposited into the account for one month.

C) The interest rate on the account is 0,27%

D) The interest rate on the account is 2.7%

6. See the expression below Which of the following statements is correct?

A) The deposit is made for 73 days.

B) The deposit is made for five months.

C) The deposit is made for 146 days.

D) The deposit is made for 45 days.

7. The Payday Loan Company advertises that you can borrow €2500 at a low interest rate of 9,55%. How much interest do you have to pay, if the loan period is

a) year?

b) half a year?

c) a month?