How to calculate duration (period) of a deposit, borrowing or lending, in order to collect or pay a certain simple flat rate interest by the principal (initial starting amount of money), simple flat interest rate and additional transaction fees (withdrawal, payment in advance, etc.).
Annual simple flat rate interest formula:
I = P × p% × n
- I = n years simple flat rate interest charged
- P = initial amount (principal)
- p% = annual simple flat interest rate (percentage of the principal charged as interest)
- n = number of years of the lending or borrowing the money
Formula of the duration of a deposit, borrowing or lending, applied to the principal - initial starting amount of money lent, deposited or borrowed - in order to earn a simple flat rate interest:
n = I ÷ (P × p%)
Examples of how to calculate the duration of a deposit, borrowing or lending, for earning a due simple flat rate interest:
- 1) For how many n years a bank account should be open if the initial starting amount of money that has to be lent, deposited or borrowed, the principal, P = 20,000 units produced a simple flat rate interest (collected or paid) D = 3,500 units with an annual simple flat interest rate of p% = 3.5%?
Answer:
n = I ÷ (P × p%) = 3,500 ÷ (20,000 × 3.5%) = 3,500 ÷ (20,000 × 3.5/100) = (100 × 3,500) ÷ (20,000 × 3.5) = 350,000 ÷ 70,000 = 35 ÷ 7 = 5 years; - 2) For how many n years a bank account should be open if the initial starting amount of money that has to be lent, deposited or borrowed, the principal, P = 5,000 units produced a simple flat rate interest (collected or paid) D = 300 units with an annual simple flat interest rate of p% = 2%?
Answer:
n = I ÷ (P × p%) = 300 ÷ (5,000 × 2%) = 300 ÷ (5,000 × 2/100) = (100 × 300) ÷ (5,000 × 2) = 30,000 ÷ 10,000 = 3 years;
Duration (period) of a simple flat interest rate investment formula calculated for a period of n years:
- Number of years of the period of the deposit, lending or borrowing, n = I ÷ (P × p%)
- Simple flat rate interest, I = P × p% × n
- Principal, P = I ÷ (p% × n)
- Simple flat interest rate, p% = I ÷ (P × n)
Duration (period) of a simple flat interest rate investment formula calculated for a period of m months:
- Number of months of the period, m = (12 × I) ÷ (P × p%)
- Simple flat rate interest, I = (P × p% × m) ÷ 12
- Principal, P = (12 × I) ÷ (p% × m)
- Simple flat interest rate, p% = (12 × I) ÷ (P × m)
Duration (period) of a simple flat interest rate investment formula calculated for a period of d days:
- Number of days of the period, d = (365 × I) ÷ (P × p%)
- Simple flat rate interest, I = (P × p% × d) ÷ 365
- Principal, P = (365 × I) ÷ (p% × d)
- Simple flat interest rate, p% = (365 × I) ÷ (P × d)
More examples on how the duration of a deposit, borrowing or lending for earning a certain simple flat rate interest formula works:
- 1) Calculate the duration (period), m, in months, of a banking deposit account with an initial starting amount (principal) P = 400 units that would generate a simple flat rate interest I = 6.67 units with a simple flat interest rate p% = 4.5%.
Answer:
m = (12 × I) ÷ (P × p%) = (12 × 6.67) ÷ (400 × 4.5%) = (12 × 6.67) ÷ (400 × 4.5/100) = (100 × 12 × 6.67) ÷ (400 × 4.5) = (3 × 6.67) ÷ 4.5 = 5 months; - 2) Calculate the duration (period), m, in months, of a banking deposit account with an initial starting amount (principal) P = 400 units that would generate a simple flat rate interest I = 7.5 units with a simple flat interest rate p% = 4.5%.
Answer:
m = (12 × I) ÷ (P × p%) = (12 × 7.5) ÷ (400 × 4.5%) = (12 × 7.5) ÷ (400 × 4.5/100) = (100 × 12 × 7.5) ÷ (400 × 4.5) = (3 × 7.5) ÷ 4.5 = 22.5 ÷ 4.5 = 5 months.