Simple Interest 6.7

Simple Interest The money earned on a savings account or an investment. It can also be money you par for borrowing money.

Simple Interest I = Interest (the money paid or earned for the use of money) P=Principal (the amount of money deposited or borrowed) r= annual interest rate (as a decimal) T= time (years…if in months put the number of months over 12)

Finding Interest Earned Blake puts $500 in a savings account. The account earns 3% simple interest per year. What is the interest earned after 3 years? P= $500 R= 3%= 0.03 T= 3 years I=PRT I=(500)(0.03)(3) I=$45

Finding the Balance Blake puts $500 in a savings account. The account earns 3% simple interest per year. What is the balance after 3 years? Balance= Principal + Interest Balance = 500 + 45 Balance = $545 after 3 years

Finding Annual Interest Rate You put $700 in an account. The account earns $224 simple interest in 8 years. What is the annual interest rate? P= $700 I= $224 R= x T= 8 years I=PRT 224 = 700(r)8 224 = 5600(r) 5600 0.04 = r Rate = 4%

Finding Amount of Time P= $800 R= 2%= 0.02 T= x I= $100 I=PRT 16 6.25 =T Time = 6.25 years A bank offers 3 savings accounts. The simple interest rate is determined by the principal. How long does it take an account with a principal of $800 to earn $100 in interest? Less than $500 1.5% $500-$5000 2% More than $5000 3%

Finding an amount Paid on a Loan 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? Principal + Interest $300 + I Find Interest: I=PRT I= 300(0.12)(4) I= $144 $300 + $144 Total Paid on Loan = $444

The Rich Get Richer Imagine you win a $5 million lottery. If you deposit that money for 10 years at 6% simple interest how much will you have at the end of 10 years? P= 5,000,000 R=0.06 T= 10 I=PRT I=(5,000,000)(0.06)(10) I=$3,000,000 How much do you have in your account? 5,000,000 +3,000,000 =$8,000,000

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