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

Credit Card Rate ReportUpdated: 03-26-2012

• National Average 15.00% • Low Interest 10.40% • Balance Transfer 12.60% • Business 13.13% • Student 13.77% • Cash Back 14.45% • Airline 14.63% • Reward 14.83% • Instant Approval 15.49% • Bad Credit 23.64%

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