Chipola College
MGF 1107
11.2 Personal Loan and Simple Interest_________________________________________
Simple Interest Formula
i = prt
Example 1: Calculating Interest and Payback Amount
Toya Brown needs to borrow $1600 to hire Mr. Young to fix her jump shot. From her credit
union, she obtains a 9-month loan with an annual simple interest rate of 6.5%.
a) Calculate the simple interest on the loan.
b) Determine the total amount the Toya will pay the credit union at the end of the 9 months.
Example 2: Determining the Annual Rate of Interest
To obtain money for new eyeglasses, Charity Mcghee decides to pawn her Liberal Arts Book.
Charity borrows $240 and after 30 days she gets her book back by paying the pawnbroker
$288. What annual rate of interest did Charity pay?
Example 3: Partial Payments
Ken Hurley wishes to purchase a new racing bicycle but does not have the $2000 purchase
price. Luckily, the bike shop has two payment options.
Option 1: Ken can pay $1000 as a down payment and then pay $1150 in 6 months.
Option 2: Ken can pay $500 as a down payment and then pay $1700 in 6 months.
Which payment has a higher annual simple interest rate?
The United State Rule
Use the table in section 11.2 for the following problems.
Example 4: Determining the Due Date of a Note
Use Table 11.1 to find (a) the due date of a loan made on March 15 for 120 days and
(b) the number of days from April 18 to July 31.
Example 5: Using the Banker’s Rule
Determine the simple interest that will be paid on a $300 loan at an interest rate of 5% for the
period March 3 to May 3 using the Banker’s rule.
Example 6: Using the United States Rule
Joy Ree Ashmore is a mathematics teacher and she plans to attend a national conference.
To pay for her airfare, on Nov. 1, 2002, she takes out a 120-day loan for $400 at an interest
rate of 12.5%. She uses some birthday gift money to make a partial payment of $150 on
January 5, 2003. She makes a second partial payment of $100 on February 2, 2003.
a) Determine the due date of the loan.
b) Determine the interest and the amount credited to the principal on January 5.
c) Determine the interest and the amount credited to the principal on February 2.
d) Determine the amount that Mrs. Ashmore must pay on the due date.