1. Simple and Compound Interest
6.6

2. Interest
The amount of money pair or earned for the use of money by a back or financial institution.

3. Simple Interest I = Interest
Paid only on the initial principal of savings account or a loan.
I = Interest
P=Principal (the amount of money invested or borrowed
r= annual interest rate (as a decimal)
T= time (years)

4. Find the simple interest of $2,250 at 6% for 4 years
t-= 4 years

5. Suppose Josh placed $2400 in the bank for 5 years. He makes $9
Suppose Josh placed $2400 in the bank for 5 years. He makes $9.20 on interest each month. Find the annual interest rate.
Hint: Time needs to be in years not in months
P=$2400
R= x
T= 5 years
I= $9.20 (60) = $552
why did we multiply by 60?
12 (5) =60
I= prt
552=2400(x)(5)
552= 12000x
0.046= x
4.6%

6. Mr. Gabel borrowed $1860 to buy a computer. He will pay $71
Mr. Gabel borrowed $1860 to buy a computer. He will pay $71.30 per month for 30 months. Find the simple interest rate for his loan.
P= 1860
R= x
T= 30 months = 2.5 years
To find out how much Interest he pays:
71.30(30)
=$2139 $
=279
I=$279
I=prt
279=1860 (r)(2.5)
279= 4650r
0.06 =r 6%

7. Compound Interest
Paid on the initial principal and on interest earned in the past
Hint: t= 1 year and repeat process for every year with new principal

8. What is the total amount of money in an account where $5000 is invested at an interest rate of 5% compounded annually after 3 years
Year 1:
Year 2:
Year 3
I=prt
I=(5000)(0.05)(1)
I=(5250)(0.05)(1)
I=5512.5(0.05)(1)
I= 250
I=262.50 I=
After the first year you have:
After year 2 you have:
After 3 years you have:
=5250 = =
$5,788.13

9. Homework
Page 283 (10-28) even