Lesson 5-8

Simple Interest

Definition• Interest- the amount of money paid or earned

for the use of money

• FORMULA FOR INTEREST - I = p r t

• I = interest

• P - principal (money invested or borrowed)

• R - rate - annual interest rate as a decimal.

• T - Time written in years

Example 1Find Simple Interest

Find the simple interest for $500 invested at 6.25% for 3 years.I = prtI = 500 0.0625 3I = $93.75

Practice ProblemFind Simple Interest

Find the simple interest for $2000 invested at 5.5% for 4 years.I = prtI = 2000 0.055 4I = $440

Example 2Find The Total Amount

Find the total amount of money in an account where $95 is invested at 7.5% for 8 months.I = prtI = 95 0.075 ⅔I = $4.75Total = 95 + 4.75 = $99.75

Practice ProblemFind The Total Amount

Find the total amount in an account where $250 is invested at 6% for 6 months.I = prtI = 250 0.06 ½I = $7.5Total = 250 + 7.50 = $257.50

Example 3Find The Interest Rate

Tonya borrowed $3,600 to buy a used car. She will be paying $131.50 each month for the next 36 months. Find the simple interest rate for her loan.Find the total Tonya will pay. $131.50 36 = $4734Find the interest. $4734 – $3600 = $1134I = prt1134 = 3600 r 3 (years)

0.105 = r Multiply by 100 to turn it into a percentager = 10.5%

Practice ProblemFind The Interest Rate

Gerardo borrowed $4,500 from his bank for home improvements. He will repay the loan by paying $120 a month for the next four years. Find the simple interest rate of the loan.Find the total Gerardo will pay. $120 48 = $5760Find the interest. $5760 – $4500 = $1260I = prt1260 = 4500 r 4

0.07 = r Multiply by 100 to turn it into a percentager = 7%