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Simple Interest Rate

The document defines and provides the formula for simple interest (I = p × r × t), where: - I is the interest amount - p is the principal (original deposit amount) - r is the annual interest rate as a decimal - t is the number of years the principal is deposited It provides examples of calculating simple interest using the formula for different principal amounts, interest rates, and time periods.

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mah
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115 views

Simple Interest Rate

The document defines and provides the formula for simple interest (I = p × r × t), where: - I is the interest amount - p is the principal (original deposit amount) - r is the annual interest rate as a decimal - t is the number of years the principal is deposited It provides examples of calculating simple interest using the formula for different principal amounts, interest rates, and time periods.

Uploaded by

mah
Copyright
© © All Rights Reserved
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Simple Interest

Simple Interest

When you deposit money in a bank account, the bank pays you
interest for the right to use your money for a period of time.

Simple Interest Formula: I = p · r · t

Principal (p) is the original amount of money deposited.


Interest is calculated based on a percent of the principal. That
percent is called the interest rate (r).
Time (t) is the number of years money is deposited.

Simple interest (I) is interest calculated only on the principal.


Simple Interest
Simple Interest
How does the formula for simple interest after one year relate to the percent equation?
Start with the simple interest formula:

After one year, t = 1. Substitute into the simple interest formula and simplify.

The simple interest formula after one year is a version of the percent equation.
Suppose you deposit $400 in a savings account and keep it in the bank
for 6 years. The annual interest rate is 5%. Identify each value in the
simple interest formula.
Simple Interest

Suppose you deposit $500 in a bank account that earns simple interest at 1.2% per
year. You keep it in the bank for two years. Which of the following is/are true?

I = 12
p = 1.2%
r = 500
t=2
Simple Interest

The principal in an account plus the accumulated interest is the balance.


Simple Interest

A new bank customer with $5,000 to deposit looks


at the manager’s poster. The customer wants to
open a CD to earn money for his retirement. If he
wants to have $5,500 in the CD, how long does he
need to keep the account?
Simple Interest

In some situations, interest is accumulated on a monthly basis.

When r is an annual interest rate in the formula I = p · r · t, time t is in years.

To find how much interest you have after 3 months, you need to convert
months to years.
Simple Interest

Suppose your friend has earned $5.51 in interest after 9 months. If the annual interest
rate is 3%, how much is the principal in the account? Round to the nearest dollar.

Suppose you have two savings accounts earning simple interest. For each account, the
bank will calculate the amount of the interest each month. Account A has a principal of
$600 with an interest rate of 3.0%. Account B has a principal of $1,200 with an interest
rate of 1.5%. Which account will earn $150 in simple interest first?

Joe borrows $200 from the bank at 6% simple interest for 3 years.
What interest does he owe, and what is his total balance (amount to
payback)?
Juan invests $5000 in bonds for 6 months at an annual interest rate of
7%. How much interest did he earn, and what is the balance in his
account?

Find the simple interest and the balance.


1) $2000 at 4% for 9 mos.
Find the annual simple interest rate

1) $2000 earns $420 simple interest over 3 years.


To buy a car, Jessica borrowed $15,000 for 3 years at an annual simple
interest rate of 9%. How much interest will she pay if she pays the
entire loan off at the end of the third year?

TJ invested $4000 in a bond at a yearly rate of 2%. He earned $200 in


interest. How long was the money invested?

Mr. Mogi borrowed $9000 for 10 years to make home improvements. If


he repaid a total of $20,000 at what interest rate did he borrow the
money?

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