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Simple Interest Essential Skill: Explicitly Assess Information and Draw Conclusions.

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Presentation on theme: "Simple Interest Essential Skill: Explicitly Assess Information and Draw Conclusions."— Presentation transcript:

1 Simple Interest Essential Skill: Explicitly Assess Information and Draw Conclusions

2 When you deposit money into a savings account, the bank invests your money and pays you interest based on an interest rate When you take out a loan, you will have to pay interest on the money you borrow What is interest and why does it exist? Simple Interest

3 There are two types of interest: Sim ple Interest: When interest is earned or paid only on the principal. Compound Interest: When interest is earned or paid on both the principal and any interest that has been earned or accrued previously.

4 Principal- the original amount of money you deposit Interest- the amount of money you earn from the bank Rate- the percent of interest Time- the amount of time (in years) you invest for Balance- the principal plus the interest Simple Interest Terminology

5 Interest = (principal)(rate)(time) I= Prt Here is how to calculate simple interest 1.) Suppose you deposit $400 in a savings account. The interest rate is 5% per year. A.) What is the amount of interest in six years? B.) What is the balance in six years?

6 I= Prt 2.) Johnny deposited $575 in a savings account for 3 years at an interest rate of 8%. How much interest will he earn? What is his new Balance? 3.) I = ____, P = $225, r = 3%, t = 2 years

7 5.) I = $300, P = $1000, r = ___, t = 5 years 6.) Sammie earned $204 in interest when she deposited $1,700 in a bank account for six years. What is her rate of interest? 4.) I = ____, P = $1000, r = 6%, t = 3 months

8 7.)Emily deposits $7000 in an account that earns 7% simple interest. About how long will it take for her account balance to reach $8,000? 8.) Sarah deposits $4500 in an account. Four years later there is $5250 in the account. What was the simple interest rate she earned on the account?

9 9.) You get a summer job at a bakery. Suppose you save $1,400 of your pay and deposit it into an account that earns simple annual interest. After 9 months, the balance is $1,421. Find the annual interest rate.


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