Notes 9.8
Name_________________
How do I
calculate simple
interest?
Example
Your turn
Bill's parents loan him $120
for a new iPod. They charge
5% simple interest. How
much does he owe after 1
year?
1. To find the interest
use the formula:
I = Prt
Fill in the values.
2. Change the percent
into a decimal and
solve.
3. Add /subtract your
answer and the original
amount.
Formula for simple
interest:
I - interest
P - principal
r- interest rate ( as a
decimal)
t - time in years
I = Prt
I =P
r
n = 120 · 5% ·
n = 120 ·
.05 ·
t
1
You deposit $400 into a
6 month certificate of
deposit. After 6
months the balance is
$412. What is the
simple interest?
I
=P
r
t
1
n=6
6 + 120 = $126
Vocabulary:
interest- the amount paid for the use
of money
principal - amount of money
borrowed or deposited
simple interest - interest is paid only
on the principal
annual interest rate - percent of
principal paid per year
balance - sum of principal and
interest