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Objective

Solve problems involving simple interest

Vocabulary

Simple interest

The amount paid or earned for the use of money

The formula for simple interest is:

Interest = Principle Rate Time

I = prt

Note: Time must be in years

Vocabulary

Principal

The amount of money deposited or invested

Example 1 Find Interest Earned

Example 2 Find Interest Earned

Example 3 Find Interest Paid on a Loan

Example 4 Find Total Paid on a Credit Card

SAVINGS Brandon found a bank offering a certificate of deposit that pays 4% simple interest. He has $1,500 to invest. How much interest will he earn in 3 years?

Write formula for interest

Replace principle with $1,500

MultiplyAnswer: I = $180

1/4

Replace rate with 4% which needs changed to a decimal

Replace time with 3 years

Add dimensional analysis

SAVINGS Cheryl opens a savings account that pays 5% simple interest. She deposits $600. How much interest will she earn in 2 years?

Answer: I = $60

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SAVINGS Brandon found a bank offering a certificate of deposit that pays 4% simple interest. He has $1,500 to invest. How much interest will he earn in 30 months?

Answer: I = $150

Multiply

Write formula for interest

Replace principle is $1,500

Replace rate is 4% which needs changed to a decimal

Replace time is 30 months which needs to be changed to years (simply put a denominator of 12)

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30

Add dimensional analysis

SAVINGS Micah opens a savings account that pays 3.5% simple interest. He deposits $2,000. How much interest will he earn in 42 months?

Answer: I = $245

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LOANS Laura borrowed $2,000 from her credit union to buy a computer. The interest rate is 9% per year. How much interest will she pay if it takes 8 months to repay the loan?

Answer: I = $120

Write formula for interest

3/4

Replace principle is $2,000

Replace rate is 9% which needs changed to a decimal

Replace time is 8 months which needs to be changed to years (simply put a denominator of 12)

Multiply

Add dimensional analysis

LOANS Juan borrowed $7,500 from the bank to purchase a used car. The interest rate is 15% per year. How much interest will he pay if it takes 2 years to repay the loan?

Answer: I = $2,250

3/4

CREDIT CARDS Alma charged a $30 handbag on her credit card with an interest rate of 8%. If she has no other charges on the card, how much money would she owe after six months?

Must find how much money Alma would owe after 6 months which means principle + interest

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First, find how much interest will be charged

Write formula for interest

CREDIT CARDS Alma charged a $30 handbag on her credit card with an interest rate of 8%. If she has no other charges on the card, how much money would she owe after six months?

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Replace principle is $30

Replace rate is 8% which needs changed to a decimal

Replace time is 6 months which needs to be changed to years (simply put a denominator of 12)

6

Multiply

I = $1.20

CREDIT CARDS Alma charged a $30 handbag on her credit card with an interest rate of 8%. If she has no other charges on the card, how much money would she owe after six months?

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Add interest to principle to find total6

I = $1.20

Total cost = principle + interestTotal cost = $30 + $1.20

Principle is $30

Interest is $1.20

Total cost = $31.20Answer:

CREDIT CARDS Curtis charged a $60 power tool on his credit card with an interest rate of 19%. If he has no other charges on the card, how much money would he owe after nine months?

Answer: Total cost = $68.55

*

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Assignment

Lesson 8:6 Simple Interest 8 - 22 All