Simple Interest
Warm Up
Problem of the Day
Lesson Presentation
Course 2
Simple Interest
Warm Up
Multiply.
1. 800

2. 1,700
3. 900

4. 1,200
Course 2
0.04

2

0.05

6


3
96
0.25
850
4
180

0.35
2,520
Simple Interest
Problem of the Day
Which number does not belong in the group?
0.75
75%
3
4
6
8
75
1,000
75
= 3 ; the others equal 3 .
1,000
4
40
Course 2
Simple Interest
By the end of class, you will learn to solve
problems involving simple interest.
Course 2
Insert Lesson
Simple
InterestTitle Here
Vocabulary
interest
simple interest
principal
Course 2
Simple Interest
When you keep money in a savings account,
your money earns interest. Interest is an
amount that is collected or paid for the use
of money. For example, the bank pays you
interest to use your money to conduct its
business. Likewise, when you borrow money
from the bank, the bank collects interest on
its loan to you.
Course 2
Simple Interest
One type of interest, called simple interest, is
money paid only on the principal. The principal
is the amount of money deposited or borrowed.
To solve problems involving simple interest, you
can use the following formula.
Rate of interest per year
(as a decimal)
Interest
I=P·r·t
Principal
Course 2
Time in years that the
money earns interest
Simple Interest
Additional Example 1A: Using the Simple Interest
Formula
Find the missing value.
A. I =
, P = $575, r = 8%, t = 3 years
I=P·r·t
I = 575 · 0.08 · 3
Substitute. Use 0.08 for 8%.
I = $138
Multiply.
The simple interest is $138.00.
Course 2
Simple Interest
Additional Example 1B: Using the Simple Interest
Formula
Find the missing value.
B. I = $204, P = $1,700, r =
, t = 6 years
I=P·r·t
204 = 1,700 · r · 6
Substitute.
204 = 10,200r
Multiply.
204 = 10,200r
10,200 10,200
0.02 = r
The interest rate is 2%
Course 2
Divide by 10,200 to isolate
the variable.
Simple Interest
Try This: Example 1A
Find the missing value.
A. I =
, P = $525, r = 7%, t = 2 years
I=P·r·t
I = 525 · 0.07 · 2
Substitute. Use 0.07 for 7%.
I = $73.50
Multiply.
The simple interest is $73.50.
Course 2
Simple Interest
Try This: Example 1B
Find the missing value.
B. I = $600, P = $2,000, r =
, t = 3 years
I=P·r·t
600 = 2,000 · r · 3
Substitute.
600 = 6,000r
Multiply.
600 = 6,000r
6,000
6000
0.1 = r
The interest rate is 10%
Course 2
Divide by 10,200 to isolate
the variable.
6-6 Insert
Title Here
SimpleLesson
Interest
Additional Example 2: Problem Solving Application
Avery deposits $6,000 in an account that earns 4%
simple interest. How long will it take for his account
balance to reach $6,800?
1
Understand the Problem
Rewrite the question as a statement:
• Find the number of years it will take for Avery’s
account to reach $6,800.
List the important information:
• The principal is $6,000.
• The interest rate is 4%.
• His account balance will be $6,800.
Course 2
Insert
Title Here
SimpleLesson
Interest
Additional Example 2: Problem Solving Application
Avery deposits $6,000 in an account that earns 4%
simple interest. How long will it take for his account
balance to reach $6,800?
2
Make a Plan
Avery’s account balance A includes the principal
plus the interest: A = P + I. Once you solve for
I, you can use I = P · r · t to find the time.
Course 2
Simple Interest
Additional Example 2: Problem Solving Application
3
Solve
A=P+I
6,800 = 6,000 + I
–6,000 – 6,000
800 = I
I=P·r·t
800 = 6,000 · 0.04 · t
800 = 240t
800 = 240t
240 240
3.33  t
It will take 3 1 years.
3
Course 2
Substitute.
Subtract to isolate the
variable.
Substitute. Use 0.04 for 4%.
Multiply.
Divide to isolate the variable.
Round to the nearest
hundredth.
Simple Interest
Additional Example 2: Problem Solving Application
4 Look Back
After exactly 3 1 years, Avery’s money will have
3
earned $800 in simple interest and his account
balance will be $6,800.
1
I = 6,000 · 0.04 · 3 3 = 800
1
So it will take 3 3 years to reach $6,800.
Course 2
Insert
Title Here
SimpleLesson
Interest
Try This: Example 2
Linda deposits $10,000 in an account that earns 8%
simple interest. How long will it take for the total
amount in her account to reach $12,000?
1
Understand the Problem
Rewrite the question as a statement:
• Find the number of years it will take for Linda’s
account to reach $12,000.
List the important information:
• The principal is $10,000.
• The interest rate is 8%.
• Her account balance will be $12,000.
Course 2
Insert
Title Here
SimpleLesson
Interest
Try This: Example 2
Linda deposits $10,000 in an account that earns 8%
simple interest. How long will it take for the total
amount in her account to reach $12,000?
2
Make a Plan
Linda’s account balance A includes the principal
plus the interest: A = P + I. Once you solve for
I, you can use I = P · r · t to find the time.
Course 2
Simple Interest
Try This: Example 2
3
Solve
A=P+I
12,000 = 10,000 + I
–10,000 –10,000
2,000 = I
Substitute.
Subtract to isolate the
variable.
I=P·r·t
2,000 = 10,000 · 0.08 · t Substitute. Use 0.08 for 8%.
Multiply.
2,000 = 800t
2,000 = 800t
Divide to isolate the variable.
800
800
2.5 = t
It will take 2 1 years.
2
Course 2
Simple Interest
Try This: Example 2
4 Look Back
After exactly 2 1 years, Linda’s money will have
2
earned $2,000 in simple interest and her account
balance will be $12,000.
1
I = 10,000 · 0.08 · 2 2 = 12,000
1
So it will take 2 2 years to reach $12,000.
Course 2
Simple
Insert Lesson
InterestTitle Here
Lesson Quiz
Find each missing value.
1. I =
, P = $800, r = 10%, t = 3 years $240
2. I = $18, P = $150, r =
3. I = $640, P =
, t = 2 years 6%
, r = 4%, t = 8 years
4. I = $120, P = $600, r = 5% t =
$2,000
4 years
5. Dennis deposits $6,000 in an account that earns
5.5% simple interest. How long will it take
before the total amount is $8,000?
a little over 6 years
Course 2