SIMPLE INTEREST Interest is the amount paid for the use of money.

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Transcript of SIMPLE INTEREST Interest is the amount paid for the use of money.

SIMPLE INTEREST

Interest is the amount

paid for the use of money.

FORMULA

I=PRT

Page 3: SIMPLE INTEREST Interest is the amount paid for the use of money.

INTEREST EQUALS• PRINCIPAL - the amount of money

invested or borrowed.• RATE - is in the annual interest converted

to a decimal.• TIME - in years.• BALANCE – the sum of the

principal and interest earned.

Page 4: SIMPLE INTEREST Interest is the amount paid for the use of money.

SAVINGS ACCOUNT

•You can also use the formula to find the simple interest when you deposit money in a savings account.

Page 5: SIMPLE INTEREST Interest is the amount paid for the use of money.

INVESTING• Angie has $500 in a savings

account that pays 5% simple interest.

• How much interest will she earn in 2 years?

• Note: 5% equals 0.05 as a decimal.

Page 6: SIMPLE INTEREST Interest is the amount paid for the use of money.

I=PRT 205.0500I

50I50$Interest

Balance = 500 + 50 = $550

Page 7: SIMPLE INTEREST Interest is the amount paid for the use of money.

• How much interest will she earn if she withdraws the money after 9 months?

• 9 months equals 9/12 of a year or 0.75 as a decimal.

75.005.0500I75.18$I

Page 8: SIMPLE INTEREST Interest is the amount paid for the use of money.

Your turn.

• How much interest would you earn on $1000, at 6¾% a year for 4¼ years?

25.40675.01000 88.286$

Balance = 1000 + 286.88 = $1286.88

Page 9: SIMPLE INTEREST Interest is the amount paid for the use of money.

When invested at an annual interest rate of 6% an account earned $180.00 of simple interest in one year. How much money was originally

invested in account?

• I = PRT• 180=• 180 = .06P

.06 .06

3,000 = P

• Interest paid by bank • Principle (invested) is unknown• Rate changed to decimal• Time is 1 year• Multiply• Divide

P (.06) (1)

Page 10: SIMPLE INTEREST Interest is the amount paid for the use of money.

A savings account is set up so that the simple interest earned on the investment is moved into a separate account at the end of each year. If an investment of $2,000

accumulate $360 of interest in the account after 4 years, what was the annual simple interest rate on the savings account?

• I = PRT• 360=• 360 = (2,000)(4)R• 360 = 8,000 R

8,000 8,000

0.045 = R

4.5% = R

• Interest paid by bank• Principle (invested)• Rate is unknown• Time is 4 years• Regroup & Multiply• Divide• Change to %

(2,000) (R) (4)

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SIMPLE INTEREST Interest is the amount paid for the use of money.

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Transcript of SIMPLE INTEREST Interest is the amount paid for the use of money.