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Simple Interest: Interest Is The Amount Paid For The Use of Money

Simple interest is calculated using the formula I=PRT, where I is interest, P is principal (amount invested or borrowed), R is the annual interest rate expressed as a decimal, and T is time in years. The document provides an example of calculating simple interest earned on $500 in a savings account paying 5% interest over 2 years ($50) and 9 months ($18.75), and calculates interest on $1000 at 6.75% for 4.25 years ($286.88).

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31 views

Simple Interest: Interest Is The Amount Paid For The Use of Money

Simple interest is calculated using the formula I=PRT, where I is interest, P is principal (amount invested or borrowed), R is the annual interest rate expressed as a decimal, and T is time in years. The document provides an example of calculating simple interest earned on $500 in a savings account paying 5% interest over 2 years ($50) and 9 months ($18.75), and calculates interest on $1000 at 6.75% for 4.25 years ($286.88).

Uploaded by

rohit80042
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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SIMPLE INTEREST

Interest is the amount paid for the use of money.

FORMULA I=PRT

INTEREST EQUALS
PRINCIPAL - the amount of money invested or borrowed. RATE - is in the annual interest converted to a decimal. TIME - in years.

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

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.

I=PRT I 500 0.05 2


I 50

Interest $50

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.

I 500 0.05 0.75 I $18.75

Your turn.
How much interest would you earn on $1000, at 6% a year for 4 years?

1000 0.0675 4.25 $286.88

SIMPLE INTEREST
Simple interest is the amount paid for the use of money.

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