Simple Interest.

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Presentation transcript:

Simple Interest

Vocabulary (Section 5.8 in book ) Simple interest is: the amount paid or earned for the use of money. The simple interest formula is I = prt where I = interest P = principal, or the amount of money borrowed or invested r = annual interest rate, or the percent of interest, expressed as a decimal t = time in years

Ex 1) Find the simple interest for $2,000 invested at 5.5% for 4 years. For simple interest, To get the interest rate as a decimal, divide by 100. In 4 years, $440 would be earned in simple interest.

Ex 2) Peggy borrowed $2,600 from a bank to help pay for her college tuition. The interest rate is 8% per year. How much simple interest will she pay if it takes her 5 years to repay the loan? For simple interest, Peggy will owe $1,040 in simple interest if she takes 5 years to repay the loan.

Ex 3) Find the total dollar amount in an account where $80 is invested at 6% for 6 months. Find the simple interest. Remember, the time must be in years! The total amount in the account is the principal plus the interest. Total = $80 + $2.40 Total = $82.40

Ex 4) Phil took out a car loan for $5,000 Ex 4) Phil took out a car loan for $5,000. At the end of 18 months, he had repaid the loan amount and an additional $300 in interest. What was the simple interest rate on the loan? Use the simple interest formula to find the rate. Remember, the time must be in years! The simple interest rate on the loan was 4%.