the interest as soon as, from the agreement, it becomes due, it is evident that he has to pay the same sum every year; and that the whole of the interest which he has to pay in any number of years is one year’s interest multiplied by the number of years. But if he do not pay the interest at once, but keeps it in his hands until he returns the principal, he will then have more of his creditor’s money in his hands every year, and if it were so agreed will have to pay interest upon each year’s interest for the time during which he keeps it after it becomes due. In the first case, the interest is called simple, and in the second compound. The interest and principal together are called the amount.
- What is the simple interest of £1049. 16. 6 for 6 years and one-third, at 4½ per cent? This interest must be 6⅓ times the interest
of the same sum for one year, which (245) is found by multiplying the sum by 4½, and dividing by 100. The process is as follows:
| (230) | ( a ) | £1049 . | 16 . | 6 |
|---|---|---|---|---|
| a × 4 | 4199 . | 6 . | 0 | |
| a × ½ | 524 . | 18 . | 3 |