Terminology Simplified Revision Notes for Leaving Cert Mathematics

Revision notes with simplified explanations to understand Terminology quickly and effectively.

Learn about Compound Interest & Depreciation for your Leaving Cert Mathematics Exam. This Revision Note includes a summary of Compound Interest & Depreciation for easy recall in your Mathematics exam

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Terminology

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In simple interest, the interest is calculated only on the original principal amount, and it remains constant over time.

SI=P \cdot r \cdot t

where $P$ is the principal amount (initial investment), $r$ is the annual interest rate, $t$ is the time.

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In compound interest, the interest is calculated on both the principal and the accumulated interest from previous periods. This causes the total amount to grow faster than with simple interest.

A=P \cdot (1+r)^t

where $A$ is the total amount after $t$ years, $P$ is the principal amount, $r$ is the annual interest rate and $t$ is the time in years.

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APR (Annual Percentage Rate) is the annual cost of borrowing money or the annual return on an investment, expressed as a percentage. It includes not only the interest rate but also additional fees or costs associated with the transaction, providing a more comprehensive view of the actual cost or return.

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AER (Annual Equivalent Rate) is a measure of the annual interest earned on a savings or investment account, assuming that the interest is compounded over the year. It standardizes the interest rate to reflect the impact of compounding, making it easier to compare savings accounts and other interest-bearing investments.

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