Math Made Easy: The role beyond the classroom

For all those who believe that Math is only limited to a select few, here is an eye-opener. Mathematics is integral to daily life in numerous ways, shaping decisions and systems in often unnoticed but fundamental manners. In today’s digital age, Math is fundamental to the technologies we use every day, from smartphones and computers to home appliances and security systems.

From budgeting to financial management to cooking and baking to shopping to loans and mortgages, Math is everywhere. “Let’s take the example of Simple and Compound Interest. Simple Interest is a method of calculating the interest accrued on a principal amount over a specified period. It is calculated based on the original amount of the loan or investment, known as the principal, and the rate of interest,” shared Abhishek Bajaj, PGT Math at Apeejay School, Rama Mandi.

The formula for Simple Interest is:  I=P×r×t

Where:

I is the interest accrued,

P is the principal amount (the initial sum of money),

R is the rate of interest per period (usually expressed as a decimal),

T is the period for which the interest is calculated (usually in years).

“Compound Interest is a method of calculating interest where interest is added to the principal amount, and then interest is calculated on the new total for each subsequent period. In other words, interest is earned on both the initial principal and any previously earned interest,” the educator said.

The formula for Compound Interest is:

A=P×[(1+r/n)〗^nt

Where:

A is the future value of the investment/loan, including interest,

P is the principal amount (the initial sum of money),

R is the annual interest rate (expressed as a decimal),

N is the number of times interest is compounded per year,

T is the time the money is invested for, in years.

“Simple Interest (SI) and Compound Interest (CI) have various applications in finance, banking, investments, and everyday life. For instance, SI is often used in consumer loans, such as personal loans, auto loans, and student loans. Borrowers pay back the principal amount plus the interest accrued over the loan period. CI is widely used in investment vehicles such as mutual funds, stocks, bonds, and retirement accounts. The reinvestment of earned interest helps in the exponential growth of investments over time,” Bajaj explained and added a few more instances where both SI and CI are used daily.

Savings Accounts: Some savings accounts offer simple interest on deposited funds. The bank pays interest periodically based on the average balance in the account. Many savings accounts and certificates of deposit (CDs) use compound interest, where interest is calculated on the initial deposit as well as on previously earned interest.

Fixed Deposits: Certain fixed deposit schemes offer simple interest on the deposited amount for a specific period.

Invoice Financing: Businesses sometimes use simple interest when financing their accounts receivable. They may offer to pay a percentage of the invoice value as interest to the financing company.

Mortgages: Compound interest is applied in mortgage loans, where the outstanding balance accrues interest, leading to larger interest payments over time.

Credit Cards: Compound interest is applied to credit card balances if the full amount isn’t paid off each month. The interest is calculated on the remaining balance, including previously accrued interest.

Understanding and applying mathematical concepts helps to navigate daily life more effectively, make better decisions, and understand the world around us in a more structured way.