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Press Ctrl-A ©G Dear 2009 – Not to be sold/Free to use Simple Interest Stage 6 - Year 11 General Mathematics Preliminary

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2 Simple Interest (1/5) Interest The money paid to a borrower or investor for the use of money. Simple Interest The simplest form of interest calculation. Calculated by using only the initial investment. Formula I =Prn Simple Interest Principal or Money Number of periods Rate of interest Click on letters

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3 Simple Interest Example (2/5) Calculate Interest on a loan of $25 000 at 8.9% per annum for 7 years. I = P n r = 25 000x 7 8.9% = 8.9 100 = 0.089 x 0.089 = $15 575 How much has been paid out on the loan? A = P + I = 25 000 + 15 575 = $40 575

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4 Simple Interest Example (3/5) Calculate return on an investment of $1 200 at 7.5% per annum for 5 years. I = P n r = 1 200x 5 7.5% = 7.5 100 = 0.075 x 0.075 = $450 How much is the investment now worth? A = P + I = 1 200 + 450 = $1 650

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5 Simple Interest Example (4/5) Calculate return on an investment of $900 at 5% per annum for 9 months. I = P n r = 900 9 months = 9 12 = x 0.05 = $33.75 How much is the investment now worth? A = P + I = 900 + 33.75 = $933.75 5% = 5 100 = 0.05 3434 3434 x

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6 Simple Interest Example (5/5) How long will it take to earn $100 on an investment of $500 at 10% per annum. I = P n r 100 = 500 r = 10 100 x 0.10 100 = 50n = 0.10 nx n = 2 years ÷50

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