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+ - SPAM: Figuring out interest and dividends for those who don't understand math

Submitted by danicagraceB
danicagraceB (3526315) writes "We can't all be Einstein’s. Many of us were vexed by the complexity of those important abstractions since school days. And yet, to barter financially as an adult, we have to understand the main difference between simple and compound interest, and just how to calculate each. And for those looking to invest, the same can be said of dividends. Below are some easy steps to navigate through the labyrinth of figures. We humbly offer this information in a desire to help the mathematically impaired. How often have you needed additional information on types of payday loans and turned to a web site search on personal loans bad credit?"

Determine interest amount

You have to know the entire amount that will be getting interest with every financial instrument as the first step to calculating interest. Then, referring to the specific product itself, determine whether its interest is calculated on a simple or a compound basis.

Simple interest is a one-time fee of a certain percentage paid on top of the principal amount. Whenever you have Compound interest, the interest builds on itself. The idea is that it resets the principal to the balance with the interest added on at the end of every period. There are daily, weekly, monthly or yearly periods you are able to choose from. The loan itself will determine this.

Getting simple interest determined

Divide the rate of interest by 100 to get a decimal figure with simple interest. For example, if a loan is paid back at 8 percent interest, the interest would be expressed as .08. Now multiply that by the principal amount. Say you borrowed $500. This was done in just a year. In this lawsuit, you would owe $40 interest. The total amount owed would end up being $540. That is how the interest is calculated.

How does compound interest work?

Maybe you will pay 8 percent compounded monthly. You owe $540 after the first month of interest. That $540 is the brand new principal after that though. Eight percent becomes $43.20 off the $540 principal. You have to pay more than $540. When added together, $583.20 becomes the brand new owed balance.

Formula for compound interest

You could need to determine what compound interest looks like over a long time period. A formula can help with this. First add 1.0 to your rate of interest. That means that your .08 is now 1.08. Multiply that number by the interest to be calculated. You also need to multiply it with itself. Your figure, with 12 months, would turn out to be 2.52, or 1.08 to the 12th power. You pay $500 times 2.52, or $1,260, after the 12 months is up.

Figuring out dividends

In an investment, such as in the purchase of stocks, the percentages earned are called dividends. The yield is what you earn in percentage from a stock in one year.

If you purchase stock that has traditionally remained steady and paid out regular dividends — let's say we paid $23.30 per share for the stock — that has a 6.3 percent (.063) yield, you can reasonably expect to make 6.3 percent of your stock's value in one year, or $1.47 per share.

You need to check the calculation of this when checking investment values since the stock market changes every day. Just use the same formula but replace the amount per share you paid with the current industry value.

Information from

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