Concept
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Yet another way to express loan returns is with a simple annual interest rate or annual percentage rate (APR), which is calculated using the following equation:
๐๐(๐ ๐ ) = 1
๐๐๏ฟฝ๐๐๐๐๐๐0 โ1๏ฟฝ
(11)
These rates are called simple, is because we do not use the mathematical idea of compounding interest. Equation (11) is determined according to a straightforward mathematical expression
relating ๐๐๐๐ and ๐๐0:
๐๐๐๐ = ๐๐0(1 + ๐๐(๐ ๐ )๐๐)
(12)
This is simpler than the exponential functions involved in Equations (5) and (9).