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Hi,
in your lecture at 10:00 Minute. Why did you take only 1 month “interest earned” to calculate for “per annum”Lost Interest was : (150,000 + 1500,000) /2 = 825,000 x 9.5% = 78375$ average per annum.
Earned Interest was : 150,000 /2 = 75,000 x 5% = 3750$ but that is an average for per month, no?
The earned Interest should have been for 10 transactions of 150,000 for the whole year?
Like > 150,000 /2 = 75,000 x 5%= 3750 x 10 = 37,500$. OR Did the information in the question meant that we will earn the 5% in total of 150,000$ only if it will be kept in the current account every month for the whole year? Like we take it out every month and then put it back so at the end of the year we get the 5% of 150,000? is that so?5% is the yearly interest rate.
We keep taking $150,000 into the current account and then spending it. So the balance in the current account keeps fluctuating between $150,000 and zero.
The interest will be high when the balance is high and will be zero when the balance is zero.
On average there is $75,000 in the account throughout the year, and the interest offer the year will be 5% x $75,000.Great! Thanks, John.
I would like to mention that there was another student in the comment box of the lecture who struggled with the same confusion with the data given and assumed 5% interest was per month on 150,000$.
Data in the notebook says: The company earns interest of 5% on their current account bank balance.
Should have been more clear : The company earns interest of 5% per annum on their current account bank balance.
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