Simple Interest Goal: Students will learn how to complete problems with simple interest. g

Visa Where have you heard the term interest? savings Bank Statement loans money makets savings

Simple Interest A method of calculating the interest charge on a loan. The interest charge is always based on the original principal, so interest on interest is not included (that's called compound interest). Example: Mrs. Baker's car loan from State Farm is a simple interest loan. I only pay interest on the amount of money I borrowed.
 Non-example: Mrs. Baker's Visa card is a compound interest loan. I have to pay interest on the accrued (already added) interest on my balance (the amount of money I owe).

Introduction to Earning Interest Write in your composition book. Introduction to Earning Interest Principal: an amount of money owned by an investor and held by a financial institution such as a bank. Deposit(s): the act of establishing, or adding to, an existing principal. Balance: the amount of money in a bank 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. Annual Percentage Rate (APR): the percentage rate at which interest is calculated annually.

I = prt Simple Interest I = interest the account earns P= principal amount of money originally put into the account r= rate (percent) must always be put in decimal form t= time (in years) the account earns interest

CERTIFICATE OF DEPOSIT (CD) An agreement between an investor and a bank (or financial institution) whereby the investor agrees to put a certain amount of money on deposit, this is the principal, for a certain amount of time without withdrawing it, this is the term, and the bank agrees to pay the investor interest at an agreed upon percentage rate, this is the annual percentage rate (APR). Example 1 Michael is saving money to buy a car. He takes $8,000 to the bank and opens an annual certificate of deposit (CD) upon which the bank agrees to pay him 2% interest. Principal = $8,000 Term = 1 year APR = 2% (.02) Beginning Balance 2% Interest Ending Balance $8,000 $160 $8,160

Find the simple interest of each. Use I = PRT You invested $8000 at a rate of 6% for 1 year. Caitlyn invested $5000 at a rate of 12.5% for 5 years. Lucas invested $6000 at a rate of 8% and made $2160 in 
interest. How long did he leave the money in the account? Let's check with the Simple Interest calculator: http://www.webmath.com/simpinterest.html

Application of Simple Interest A. David opened a bank account that earns 7% interest for a year. After six months he received $52.50 in interest. How much money had David put into the account when it was opened? Equation: Solve:

Kyle opened a savings account that earns 8% annual interest. After 9 months, he received $72 in interest. How much did he invest in the account in the beginning? equation: solution:

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