11/7/11
• Bellringer:
– What do you know about interest (the money
kind)?
Simple
Interest
http://www.youtube.com/watch?v=iQSDO20s
L4w
Simple Interest is money
added onto the original
amount saved (earned) or
borrowed (charged).
Simple Interest Formula
I (Interest) - The amount earned or the
amount charged
p (Principal)- The amount borrowed or
deposited
r (Rate) – Percent at which the interest is
charged
t (Time)- In years (if given in months, put it
over 12)
Calculating Simple Interest
How much money would you pay in interest if
you borrowed $1,600 for 1 ½ years at 16% APR?
Convert the percent to a decimal.
16% = .16
I = prt
I = $1,600 x .16 x 1.5
I = $384
Shawnique bought a beautiful house for $350,000.
Her loan was for 30 years at 6.5% APR. How much
money will she end up paying in interest?
6.5% = . 065
I = prt
I = $350,000 x .065 x 30
I = $682,500
Kent put $8,500 into an 18 month CD. The
interest rate is 3.25% How much money will Kent
earn in interest?
3.25% = . 0325
I = prt
I = $8,500 x .0325 x 1.5
I = $414.38
Katie bought a new sports car for $28,500. She
financed her car for 6 years at 6.75%APR. How
much will she end up paying for interest on her
car?
6.75% = . 0675
I = prt
I = $28,500 x .0675 x 6
I = $11,542.50
Cody bought a new truck for $25,000. He took
out a loan for 5 ½ years with 7.75% APR. How
much will Cody end up paying in interest?
7.75% = . 0775
I = prt
I = $25,000 x .0775 x 5.5
I = $10,656.25
Tia saved her $9,000 for 2 ½ years at 4.25% APR in
a CD, to go on a month long vacation with her
family. How much did she earn in interest?
4.25% = . 0425
I = prt
I = $9,000 x .0425 x 2.5
I = $956.25
Joe borrows $200 from the bank at 6% simple
interest for 3 years. What interest does he owe,
and what is his total balance (amount to payback)?
P  200
r  6%  0.06
t 3
Interest
I  36
Balance
Balance = P + I
Balance = 200 + 36
Balance = 236
Interest owed  $36
Balance = $236
I  P r t
I  (200)(0.06)(3)
Worksheet
• Do problems 1-8
11/8/11
• Get out your homework.
• Bellringer: Katie bought a new
sports car for $28,500. She
financed her car for 6 years at
6.75%APR. How much will she
end up paying for interest on her
car?
Homework Answers
1. Interest= $204
Total= $1004
5. Interest= $43.75
Total= $1793.75
2. Interest= $37.50
Total= $287.50
6. Interest= $360
Total= $2360
3. Interest= $72
Total= $972
7. Interest= $1250
Total= $6250
4. Interest= $125
Total= $1375
8. Interest= $450
Total= $6450
Juan invests $5000 in bonds for 6 months at an
annual interest rate of 7%. How much interest
did he earn, and what is the balance in his account?
P  5000
r  7%  0.07
t  6 months  0.5 years
Interest
I  P r t
I  (5000)(0.07)(0.5)
I  175
Interest owed  $175
Balance
Balance = P + I
Balance = 5000 + 175
Balance = 5175
Balance = $5175
Find the simple interest and the balance.
1) $2000 at 4% for 9 mos.
P  2000
r  4%  0.04
t  9 mos.  0.75 yrs.
I  P r t
I  (2000)(0.04)(0.75)
I  $60
Balance = P + I
Balance = 2000 + 60
Balance = $2060
Find the annual simple interest rate.
1) $2000 earns $420 simple interest over 3 years.
P  2000
I  420
t  3 years
I  P r t
420  (2000)(r)(3)
420  6000r
6000 6000
0.07  r
Annual Interest Rate  7%
Find the annual simple interest rate.
2) $625 simple interest is earned on a 2 year loan
of $5000.
P  5000
I  625
t  2 years
I  P r t
625  (5000)(r) (2)
625  10,000r
10,000 10,000
0.0625  r
1
r  6.25% or 6 %
4
Find the principal amount invested.
1
3) Interest of $1650 is earned over 4 years at 5 %.
2
I  1650
t  4 years
r  5.5%  0.055
I  P r t
1650  (P)(0.055)(4)
1650  0.22P
0.22 0.22
7500  P
Principal  $7500
Quick Draw for Points
• You will have 60 seconds to solve each
problem
• This is your exit ticket. Fold your piece of
paper so you have 4 boxes.
Example 1: Finding Interest on a Loan
To buy a car, Jessica borrowed $15,000 for 3
years at an annual simple interest rate of 9%.
How much interest will she pay if she pays the
entire loan off at the end of the third year?
First, find the interest she will pay.
I=P

I = 15,000
r


t
0.09
I = 4050
Use the formula.

3
Substitute. Use 0.09 for 9%.
Solve for I.
Example 1A: Finding Total Payment on a Loan
What is the total amount that she will repay?
You can find the total amount A to be repaid on a
loan by adding the principal P to the interest I.
Jessica will pay $4050 in interest.
P+I=A
principal + interest = total amount
15,000 + 4050 = A
Substitute.
19,050 = A
Solve for A.
Jessica will repay a total of $19,050 on her loan.
Example 2
TJ invested $4000 in a bond at a yearly rate of
2%. He earned $200 in interest. How long was
the money invested?
I=P

200 = 4000
r


t
0.02
Use the formula.

t
200 = 80t
2.5 = t
Substitute values into
the equation.
Solve for t.
The money was invested for 2.5 years, or 2
years and 6 months.
Example 3
Bertha deposited $1000 into a retirement
account when she was 18. How much will
Bertha have in this account after 50 years at a
yearly simple interest rate of 7.5%?
I=P

I = 1000
r


t
0.075
I = 3750
Use the formula.

50
Substitute. Use 0.075
for 7.5%.
Solve for I.
The interest is $3750. Now you can find the total.
Example 3 Continued
P+I=A
Use the formula.
1000 + 3750 = A
4750 = A
Substitute.
Solve for A.
Bertha will have $4750 in the account after 50 years.
Example 4
Mr. Mogi borrowed $9000 for 10 years to
make home improvements. If he repaid a total
of $20,000 at what interest rate did he borrow
the money?
P+I=A
Use the formula.
9000 + I = 20,000 Substitute.
I = 20,000 – 9000 = 11,000 Subtract 9000
from both sides.
He paid $11,000 in interest. Use the amount of
interest to find the interest rate.
Example 4 Continued
I=P

r

11,000 = 9000
t

Use the formula.
r

10 Substitute.
11,000 = 90,000
11,000
=r
90,000

r
Simplify.
Divide both sides by 90,000.
0.12 = r
Mr. Mogi borrowed the money at an annual rate of
about 12.2%.
Summary
•
•
•
•
I = __________
P=__________
r = __________
t = __________
• Interest Formula: I = ( )( )( )
• Balance Formula: A = ___ + ___
Part 2 on worksheet
11/9/11
Bellringer: Fill in the blanks.
•
•
•
•
I = __________
P=__________
r = __________
t = __________
• Interest Formula: I = ( )( )( )
• Balance Formula: A = ___ + ___
Homework answers:
1.
2.
3.
4.
5.
6.
350*0.05*4= $70
180=1500*0.04*t t=3 years
650+195= $355
82.50+1000= $1082.50
96=800*r*4 r=3%
139.50=930*0.06*t t=2.5
Word problem
• Read the problem, underline what you don’t
know.
• When you are finished, write in 25 words or
less how you did the problem.
Cody bought a new truck for $25,000. He took
out a loan for 5 ½ years with 7.75% APR. How
much will Cody end up paying in interest?
7.75% = . 0775
I = prt
I = $25,000 x .0775 x 5.5
I = $10,656.25