1. Simple Interest
7th Grade Math

2. 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

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

4. 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

5. 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?

6. 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%

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

8. 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

9. 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?

10. 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

11. 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?