# Charges simple interest

Financial management

In practice, two methods are used percent. The first - a simple calculation of the interest rate, the interest rate applicable to the initial amount for the duration of the loan. Second - Compound interest rate at which the interest rate is set to an amount that includes the amount of the loan and interest on it for the previous period.

Thus, the method of discounting is inverse to the method of building.

In some cases, the provision of loans to the amount of interest can be kept at the moment of the transaction. The process of calculation and deduction of interest is called pre-recorded transaction. When performing accounting operations a bank or other financial institution receives a discount (discount on the price), as the difference between (FV - PV).

Examples accounting operations can be bill discounting, in which the bank buys bills in a drawer at a price lower than the amount that a bank can receive at maturity.