simple interest
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Simple Interest
You just bought a quality used car from your Aunt for $3,000. She agreed to let you make payments for 3 years with simple interest at 6 percent. After you have paid her back fully and on time, how much did the car actually cost?
Do you think this is a good deal?
Simple Interest
I=3000 X .06 X 3The Simple Interest is…
$540
Total Amount of the Loan is...$3540
Is this a good deal?
Name any items or purchases that usually requires a person to get a LOAN.
Simple Interest
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Simple Interest
You will learn how banks calculate the amount in dollars to be repaid, when money is borrowed.
Otherwise known as…..
Simple Interest
I=PRT"P" is the Principal and is the amount you borrow.
"R" is the Rate in percent.
"T" is the Time in years.
Simple Interest
Interest paid on the initial investment (the principal) only.
Simple Interest
When banks use simple interest, they consider the principal, the interest rate, and the length of time of the loan.
Simple Interest
"P" How much is the principal?
"R" What is the Rate?
"T" What is the time?
Simple Interest
"P" $100
"R" 10%
"T" 2 years
Simple Interest
What is the Total Amount Owed?
$120
Simple Interestpractice
You get a loan for a boat in the amount of $7000
at 6% for 5 years.
Simple Interest
I=PRT"P" is $7000
"R" 6% (or .06)
"T" 5 Years
Simple Interestpractice
I = $7000 at 6% for 5 yearsI = 7000 X .06 X 5I = 420 X 5I = $2100
Total Money Owed: $2100 + $7000 = $9100
Simple Interestpractice
You get a loan to move for the amount of $2500
at 4% for 6 months.
Simple Interest
I=PRT"P" is $2500
"R" 4% (or .04)
"T" 6 months = ½ Year = .5
Simple Interest
I=2500 X .04 X .5 The Simple Interest is…
$50
Total Amount of the Loan is...$2550
Now You will practice.
• Complete the following chart.• You will trade with the awesome person
sitting next to you and check answers.
Roll CallWhat is Simple Interest?
Interest paid on the initial investment (the principal) only.
What is….
I=PRT?"P" is the Principal and is the amount you borrow.
"R" is the Rate in percent.
"T" is the Time in years.
After you figure out Simple Interest you will know if you can afford to pay for
things such as……
Additional Assignment• Find out from your parents
personal bank what the current interest rates are for:• MORTGAGE• CAR LOAN• CD’s
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