SIMPLE INTEREST
simple interest:
interest earned or paid only on the original
amount invested or borrowed
principal:
the amount of money that is borrowed or
invested
amount:
the sum of the principal and interest
(A = P + I)
SIMPLE INTEREST:
I=Prt
A=P+I
To calculate P, r, or t use the “triangle”:
I

P
r
x
Unit 5 Lesson 1
t
x
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Example 
Barney invested $4500 in a two year regular interest Canada Savings
Bond (CSB) that earns 7.5% interest annually. Determine the interest
Barney earned on the bond and the value of the bond at the end of the
term.
I=
P=
r=
t=
Example 
Fred had a credit card balance of $550 that was 31 days overdue. The
annual interest rate on the card is 23.9%. Determine how much money
Fred had to pay in interest charges.
I=
P=
r=
t=
Example 
Mark invested $2000 for 4 years and earned $960 in interest.
Determine the annual rate of interest on his investment.
I=
P=
r=
t=
Example 
Determine the amount borrowed if Stacey earned $317 in interest at a
rate of 10%/a for 30 weeks.
I=
P=
r=
t=
Unit 5 Lesson 1
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Example 
Betty invested $4500 into a Guaranteed Investment Certificate (GIC)
that earns 7.5% annually. Determine how long it took Betty to make
$3375 in interest.
I=
P=
r=
t=
Example 
Principle
($)
P
480
Complete the given table:
Interest Rate
(%)
r
9.8 =
1000
8=
2100
6.5 =
Time
=
t
12 weeks
Interest
($)
I
Amount
($)
A=P+I
3 years
9 months
=
5=
=
4320
5600
3.5 =
180 days
86.30
2.5 years
810
980
HOMEWORK QUESTIONS:
1.
Interest Earned: $600 is invested for 8 years at 7% simple interest.
a)
Determine the amount of interest is earned.
b)
Determine the total value of the investment at maturity.
[$336]
[$936]
2.
Interest Rate: Susan’s $2000 investment paid her $210 at the end of 1 year.
Determine the simple interest rate.
[10.5%]
3.
Principal: Martha lent Aaron money 20 months ago at a simple interest rate of
14%. He repaid her in full plus interest of $399. Determine the amount Martha
lent Aaron 20 months ago.
[$1710]
4.
Time: Jerry lent a friend $6000 at 10% simple interest. He paid Jerry back a
total of $7200 when it matured. Determine the time period for the loan.
[2 years]
Unit 5 Lesson 1
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