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Simple Interest 7th Grade Math

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**Vocabulary Interest Principal Simple Interest**

Money paid or earned for the use of money Principal The amount of money borrowed or invested Simple Interest Money paid or earned only on the principal

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**Simple Interest Formula**

I = Prt Annual Interest Rate (in decimal form) Simple Interest Principal Time (in years)

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**Finding Interest Earned**

You put $500 in a savings account. The account ears 3% simple interest per year. What is the interest earned after 3 years? I = Prt I = 500 · .03 · 3 I = 45 What is the balance after 3 years? = $545

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Check Yourself You put $200 in a savings account. The account earns 2% simple interest annually. What is the interest earned after 5 years? What is the balance after 5 years?

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**Finding Annual Interest Rate**

You put $1000 in an account. The account earns $100 simple interest in 4 years. What is the annual interest rate? I = Prt 100 = 1000 · r · 4 100 = 4000 · r r = becomes 2.5%

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Check Yourself You put $700 in an account. The account earns $224 simple interest in 8 years. What is the annual interest rate?

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**Finding an Amount of Time**

A bank offers an annual simple interest rate of 2.0% for balances between $500 and $5000. How long will does it take an account with a principal of $800 to earn $100 interest? I = Prt 100 = 800 · .02 · t 100 = 16 · t t = 6.25 or 6 years 3 months

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Check Yourself A bank offers an annual simple interest rate of 1.5% for balances under $500. How long does it take an account with a principal of $400 to earn $36 interest?

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**Finding Amount Paid on a Loan**

You borrow $600 to buy a violin. The simple interest rate is 15%. You pay off the loan after 5 years. How much do you pay for the loan? I = Prt I = 600 · .15 · 5 I = 450 (this is just interest) Principal + Interest = Total Paid = $1050

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Check Yourself You borrow $300 to buy a guitar. The simple interest rate is 12%. You pay off the loan after 4 years. How much do you pay for the loan?

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