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Applications of Simple Interest Example 1: Eight years ago Ann put some money in a savings account at 5% interest. She checked her account balance and found it to be $7840. What was the original amount invested? 1) Variable declaration: Let x represent the original amount invested. This is called the principal.

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2) Write the equation: Eight years ago Ann put some money in a savings account at 5% interest. She checked her account balance and found it to be $7840. What was the original amount invested? Since the original amount (principal) is x, …

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3) Solve the equation: Eight years ago Ann put some money in a savings account at 5% interest. She checked her account balance and found it to be $7840. What was the original amount invested?

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4) Write an answer in words, explaining the meaning in light of the application The original amount that Ann invested was $5600. x = original amount Eight years ago Ann put some money in a savings account at 5% interest. She checked her account balance and found it to be $7840. What was the original amount invested?

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Example 2: Five years ago Megan borrowed $7000 for a kitchen project. Her current payback amount is $8225. What was the interest rate? Applications of Simple Interest 1) Variable declaration: Let r represent the interest rate.

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2) Write the equation: Since the rate is r, … Five years ago Megan borrowed $7000 for a kitchen project. Her current payback amount is $8225. What was the interest rate?

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3) Solve the equation: Five years ago Megan borrowed $7000 for a kitchen project. Her current payback amount is $8225. What was the interest rate?

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4) Write an answer in words, explaining the meaning in light of the application Megan’s interest rate was 3.5%. r = interest rate Five years ago Megan borrowed $7000 for a kitchen project. Her current payback amount is $8225. What was the interest rate?

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© Family Economics & Financial Education – May 2012 – Time Value of Money Math – Slide 1 Funded by a grant from Take Charge America, Inc. to the Norton.

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