1. Consumer Math

2. Chapter 2
Consumer Arithmetic

3. Learning Unit Objectives
#10
Simple Interest
Learning Unit Objectives
Calculate simple interest
Calculate the total amount of a loan and the total value of an investment at the end of a special term.

4. Learning Unit Objectives
#10
Simple Interest
Learning Unit Objectives
Finding Unknown in Simple Interest Formula
Using the interest formula, calculate the unknown when the other two (principal, rate, or time) are given

5. Maturity Value = Principal (P) + Interest (I)
Cost of borrowing
money
The amount of the loan
(Face value)

6. Simple Interest Formula
Simple Interest (I) = Principal (P) x Rate (R) x Time (T)
Stated as a
Percent
Stated in years
Maha borrowed $30,000. The loan was for 6 months at a rate of 8%. What is interest and maturity value?
SI = $30,000 x.08 x 6 = $1,200 12
MV = $30,000 + $1,200 = $31,200

7. The Method of Calculating Simple Interest and Maturity Value
Exact Interest (365 Days)
Time = Exact number of days
365

8. The Method of Calculating Simple Interest and Maturity Value
On March 4, Ray borrowed $40,000 at 8%.
Interest and principal are due on July 6.
Exact Interest (365 Days)
I = P X R X T
$40,000 x .08 x 124
365
$1,087.12
MV = P + I
$40,000 + $1,087.12
$41,087.12

9. Finding Unknown in Simple Interest Formula - Principal
Interest (I) = Principal (P) x Rate (R) x Time (T)
Christina Jones paid the bank $19.48 interest at 9.5% for 90 days. How much did she borrow?
Principal = Interest
Rate x Time
.095 times 90 divided by Do not round answer $
P = .095 x (90/365) = $831.6

10. I = P x R x T = 10000 x 10 x 3 100 = $ 3000 I must pay back = P + I
How much must I pay back if I borrow $10000 for 3 years at 10% pa simple interest?
I = P x R x T
= x 10 x 3
100
= $ 3000
I must pay back = P + I =
=$ 13000
.Total amount = P + I .

11. What simple interest rate would allow $ 6000 to grow to an amount of $ 14550 in 10 years?
So the simple interest I= – 6000
=$ 8550
Rate = Interest
Principal x Time
.I was getting 14.25% interest rate
R = $ = % pa.
6000x 10

12. Finding Unknown in Simple Interest Formula - Rate
Interest (I) = Principal (P) x Rate (R) x Time (T)
Christina Jones borrowed $ from the bank. Her interest is $19.48 for 90 days. What rate of interest did Christina pay?
Rate = Interest
Principal x Time $
R = $ x (90/365) = 9.6%

13. Finding Unknown in Simple Interest Formula - Time
Interest (I) = Principal (P) x Rate (R) x Time (T)
Christina Jones borrowed $ from the bank. Her interest is $19.48 for 9.5%. How much time does Christina have to repay the loan?
Time (yrs) = Interest
Principle x Rate
Convert years to days (assume 365 days) $
T = $ x = .25
.25 x 365 = days

14. Vocabulary:
Principal: an amount of money owed by an investor and held by a financial institution such as a bank.
Deposit: the act of establishing , or adding to , existing principal.
Balance: the amount of money in an account.
Interest: the amount of money you earn by leaving deposits in a bank or financial institution Interest is a percentage of your principal.
Term: the period of time an investment lasts.

15. Steps to answer simple interest question
Ahmad borrowed $ for 4 months at 12.75% pa simple interest to pay for her new house while her old one was being sold . How much interest did she pay? And how much was paid back altogether?
P = $78000
T= 4 months or 4 /12 years
R = 12.75% or or 12.75
100
I= ?
Step 1. Read the problem carefully and list the information( look for the ‘key’ words)
Step 2. Find the interest
I = P x R x T
= x 12.75% x 4/12
= $ 3315
Step 3. To calculate the amount paid all together
The total amount = P + I
= =$81315