There are four factors which determine the answer to "how much interest does 40,000 generate in a savings account". Namely,
r - The rate of return the savings account pays
k - The rate of compounding
t - The length of time the money resides in the account
P - the principal involved, in this case, $40,000
The formula for the balance, B, is generally expressed as a function of time, t
B(t) = P [ 1 + (r/k) ] kt
If the rate is 5%, compounded monthly for one year then the formula becomes
B(1) = 40000 [ 1 + (0.05/12) ] ) 12x1
B(1) = 40000 [ 1 + 0.0041666 ] 12
B(1) = 40000 [ 1.0041666] 12
B(1) = 40000 ( 1.0511619 )
B(1) = 42,046.48
The amount of interest earned for that time frame is the difference between the final balance and the principal you started with or (42046.48 - 40000) which equals 2,046.48
Alternatively, you can use the basic formula for interest which is
i = Prt
which gives us
i = 40000 x 0.05 x 1
i = 2,000
however, with this simple interest formula the effects of compounding are neglected.
It is also possible for interest to be compounded continuously in which case we add the value e (e ~ 2.71828183) into our original equation or,
B(t) = Pert
B(t) = 40000e(0.05x1)
B(t) = 40000 x 1.05127
B(t) = 42050.84
in which case our interest earned is 42050.84 - 40000 or $2,050.84. This is $4.36 more than if our money were only compounded monthly.
40000
400
2000
Assuming that the interest is charged on the amount owed by Geeta for purchasing the goods, the journal entry would be: Debit: Accounts Receivable - Geeta (Rs. 40000) Credit: Sales Revenue (Rs. 40000) Credit: Interest Income (amount of interest charged)
The year 40000 AD
The face value is 40000*(1.05)10 = 65156 approx.
The face value is 40000*(1.05)10 = 65156 approx.
1 percent of 40000 = 4001% of 40000= 1% * 40000= 0.01 * 40000= 400
22% of 40000= 22% * 40000= 0.22 * 40000= 8800
3.5% of 40000= 3.5% * 40000= 0.035 * 40000= 1400
3.15% of 40000= 3.15% * 40000= 0.0315 * 40000= 1260
You will earn 1000000*4/100 = 40000.