11/7/11

11/7/11

• Bellringer:– What do you know about interest (the money

kind)?

Simple Interest

http://www.youtube.com/watch?v=iQSDO20sL4w



is money added onto the original amount saved (earned) or borrowed (charged).

Simple Interest

Simple Interest Formula

I (Interest) - The amount earned or the amount charged

p (Principal)- The amount borrowed or deposited

r (Rate) – Percent at which the interest is charged

t (Time)- In years (if given in months, put it over 12)

Calculating Simple Interest

Convert the percent to a decimal.

16% = .16

How much money would you pay in interest if you borrowed $1,600 for 1 ½ years at 16% APR?

I = prt

I = $1,600 x .16 x 1.5

I = $384

Shawnique bought a beautiful house for $350,000. Her loan was for 30 years at 6.5% APR.

How much money will she end up paying in interest?

6.5% = . 065

I = prt I = $350,000 x .065 x 30

I = $682,500

Kent put $8,500 into an 18 month CD. The interest rate is 3.25% How much money will Kent

earn in interest?

3.25% = . 0325

I = prt I = $8,500 x .0325 x 1.5

I = $414.38

Katie bought a new sports car for $28,500. She financed her car for 6 years at 6.75%APR. How much will she end up paying for interest on her

car?

6.75% = . 0675

I = prt I = $28,500 x .0675 x 6

I = $11,542.50

Cody bought a new truck for $25,000. He took out a loan for 5 ½ years with 7.75% APR. How

much will Cody end up paying in interest?

7.75% = . 0775

I = prt I = $25,000 x .0775 x 5.5

I = $10,656.25

Tia saved her $9,000 for 2 ½ years at 4.25% APR in a CD, to go on a month long vacation with her

family. How much did she earn in interest?

4.25% = . 0425

I = prt I = $9,000 x .0425 x 2.5

I = $956.25

Joe borrows $200 from the bank at 6% simpleJoe borrows $200 from the bank at 6% simpleinterest for 3 years. What interest does he owe,interest for 3 years. What interest does he owe,

and what is his total balance (amount to payback)?and what is his total balance (amount to payback)?

Interest Balance

I P r t I (200)(0.06)(3)

I 36

Interest owed $36

Balance = P + I

Balance = 200 + 36Balance = 236

Balance = $236

P 200r 6% 0.06t 3

Worksheet

• Do problems 1-8

11/8/11

• Get out your homework.

• Bellringer: Katie bought a new sports car for $28,500. She financed her car for 6 years at 6.75%APR. How much will she end up paying for interest on her car?

Homework Answers1. Interest= $204 5. Interest= $43.75

Total= $1004 Total= $1793.75

2. Interest= $37.50 6. Interest= $360

Total= $287.50 Total= $2360

3. Interest= $72 7. Interest= $1250

Total= $972 Total= $6250

4. Interest= $125 8. Interest= $450

Total= $1375 Total= $6450

Juan invests $5000 in bonds for 6 months at anJuan invests $5000 in bonds for 6 months at anannual interest rate of 7%. How much interestannual interest rate of 7%. How much interest

did he earn, and what is the balance in his account?did he earn, and what is the balance in his account?

Interest Balance

I P r t I (5000)(0.07)(0.5)

I 175

Interest owed $175

Balance = P + I

Balance = 5000 + 175Balance = 5175

Balance = $5175

P 5000r 7% 0.07t 6 months 0.5 years

Find the simple interest and the balance.Find the simple interest and the balance.

1) $2000 at 4% for 9 mos.

P 2000r 4% 0.04t 9 mos. 0.75 yrs.

I P r t I (2000)(0.04)(0.75)I $60

Balance = P + I

Balance = 2000 + 60Balance = $2060

Find the annual simple interest rate.Find the annual simple interest rate.1) $2000 earns $420 simple interest over 3 years.

P 2000I 420t 3 years

I P r t 420 (2000)(r)(3)420 6000r

Annual Interest Rate 7%

6000 60000.07 r

Find the annual simple interest rate.Find the annual simple interest rate.2) $625 simple interest is earned on a 2 year loan of $5000. P 5000

I 625t 2 years

I P r t 625 (5000)(r)(2)625 10,000r

r 6.25%

10,000 10,0000.0625 r

1or 6 %4

Find the principal amount invested.Find the principal amount invested.13) Interest of $1650 is earned over 4 years at 5 %.2

I 1650t 4 yearsr 5.5%

I P r t 1650 (P)(0.055)(4)1650 0.22P

Principal $7500

0.22 0.227500 P

0.055

Quick Draw for Points

• You will have 60 seconds to solve each problem

• This is your exit ticket. Fold your piece of paper so you have 4 boxes.

To buy a car, Jessica borrowed $15,000 for 3 years at an annual simple interest rate of 9%. How much interest will she pay if she pays the entire loan off at the end of the third year?

Example 1: Finding Interest on a Loan

First, find the interest she will pay.

I = P r t Use the formula.

I = 15,000 0.09 3 Substitute. Use 0.09 for 9%.

I = 4050 Solve for I.

Example 1A: Finding Total Payment on a Loan

What is the total amount that she will repay?

Jessica will pay $4050 in interest.

P + I = A principal + interest = total amount

15,000 + 4050 = A Substitute.

19,050 = A Solve for A.

You can find the total amount A to be repaid on a loan by adding the principal P to the interest I.

Jessica will repay a total of $19,050 on her loan.

Example 2


200 = 4000 0.02 t Substitute values into the equation.

2.5 = t Solve for t.

TJ invested $4000 in a bond at a yearly rate of 2%. He earned $200 in interest. How long was

the money invested?

200 = 80t

The money was invested for 2.5 years, or 2 years and 6 months.


I = 1000 0.075 50 Substitute. Use 0.075 for 7.5%.

I = 3750 Solve for I.

The interest is $3750. Now you can find the total.

Example 3

Bertha deposited $1000 into a retirement account when she was 18. How much will

Bertha have in this account after 50 years at a yearly simple interest rate of 7.5%?

P + I = A Use the formula.

1000 + 3750 = A Substitute.

4750 = A Solve for A.

Bertha will have $4750 in the account after 50 years.

Example 3 Continued

Mr. Mogi borrowed $9000 for 10 years to make home improvements. If he repaid a total of $20,000 at what interest rate did he borrow

the money?

Example 4

P + I = A Use the formula.

9000 + I = 20,000 Substitute.

I = 20,000 – 9000 = 11,000 Subtract 9000 from both sides.

He paid $11,000 in interest. Use the amount of interest to find the interest rate.

Example 4 Continued

11,000 = 90,000 r Simplify.


11,000 = 9000 r 10 Substitute.

11,000 90,000

= r Divide both sides by 90,000.

0.12 = r

Mr. Mogi borrowed the money at an annual rate of about 12.2%.

Summary

• I = __________• P=__________• r = __________• t = __________

• Interest Formula: I = ( )( )( )• Balance Formula: A = ___ + ___

Part 2 on worksheet

11/9/11Bellringer: Fill in the blanks.

• I = __________• P=__________• r = __________• t = __________

• Interest Formula: I = ( )( )( )• Balance Formula: A = ___ + ___

Homework answers:

1. 350*0.05*4= $70

2. 180=1500*0.04*t t=3 years

3. 650+195= $355

4. 82.50+1000= $1082.50

5. 96=800*r*4 r=3%

6. 139.50=930*0.06*t t=2.5

Word problem

• Read the problem, underline what you don’t know.

• When you are finished, write in 25 words or less how you did the problem.

Cody bought a new truck for $25,000. He took out a loan for 5 ½ years with 7.75% APR. How

much will Cody end up paying in interest?

7.75% = . 0775

I = prt I = $25,000 x .0775 x 5.5

I = $10,656.25

Documents

11/7/11