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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 Page 1 of 3 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 Page 2 of 3 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 Page 3 of 3