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Simple Interest

1. The document explains the simple interest formula I=PRT and how to calculate simple interest earned on savings accounts or investments over time. 2. Examples are provided to demonstrate how to use the formula to calculate interest, principal, rate, or time given values for three of the four variables. 3. Step-by-step workings are shown for each example to illustrate the calculation process.

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Laela Afti Muslikhatin
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62 views12 pages

Simple Interest

1. The document explains the simple interest formula I=PRT and how to calculate simple interest earned on savings accounts or investments over time. 2. Examples are provided to demonstrate how to use the formula to calculate interest, principal, rate, or time given values for three of the four variables. 3. Step-by-step workings are shown for each example to illustrate the calculation process.

Uploaded by

Laela Afti Muslikhatin
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Simple Interest

Outcome :
Able to solve mathematical and daily problems
involving measurement, estimation and conversion.

LO :
Expert Thinking
(system thinking & analytical thinking)
Simple Interest
Formula
I = PRT
I = PRT
• I = interest earned (amount of money the
bank pays you)
• P = Principle amount invested or
borrowed.
• R = Interest Rate usually given as a
percent (must changed to decimal before
plugging it into formula)
• T = Time (must be measured in years) or
converted to years by dividing by 12 months
Converting
• Change % to decimal • Answers

1) 12% 1) 0.12 Move 2 places


2) 5% 2) 0.05 to left & drop % sign
3) 2½% 3) 0.025
4) 8.5% 4) 0.085

• Change from decimal to %


5) 0.098 5) 9.8%
6) 0.455 6) 45.5%
Move 2 places
to right & add % sign
I = PRT
Solve for one of variables:
• Solving for I • Solving for other
• Plug in numbers for variables
P, R, & T. • Plug in what you
• Then multiply know.
• Multiply the
numbers that are
on same side then
divide by that
answer.
1. A savings account is set up so that the simple interest earned on the
investment is moved into a separate account at the end of each year. If
an investment of $5,000 is invested at 4.5%, what is the total simple
interest accumulated in the checking account after 2 years.

• I = PRT • Interest paid by bank


• I= (5,000)(0.045)(2) is unknown
• I=$450 • Principle (invested)
• Rate changed to
decimal
• Time is 2 years
• Multiply
2. A savings account is set up so that the simple interest earned on the
investment is moved into a separate account at the end of each year. If
an investment of $7,000 is invested at 7.5%, what is the total simple
interest accumulated in the checking account after 3 years.

• I = PRT • Interest paid by bank


• I= (7,000)(0.075)(3) is unknown
• I=$1575 • Principle (invested)
• Rate changed to
decimal
• Time is 3 years
• Multiply
3. When invested at an annual interest rate of 6% an account
earned $180.00 of simple interest in one year. How much
money was originally invested in account?

• I = PRT • Interest paid by


• 180= P(0.06)(1) bank
• 180 = 0.06P • Principle (invested)
is unknown
0.06 0.06
• Rate changed to
3,000 = P
decimal
• Time is 1 year
• Multiply
• Divide
4. When invested at an annual interest rate of 7% an account
earned $581.00 of simple interest in one year. How much
money was originally invested in account?

• I = PRT • Interest paid by


• 581= P(0.07)(1) bank
• 581 = 0.07P • Principle (invested)
is unknown
0.07 0.07
• Time is 1 year
$8,300 =P
• Multiply
• Divide
5. A savings account is set up so that the simple interest earned on
the investment is moved into a separate account at the end of each
year. If an investment of $7,000 accumulate $910 of interest in the
account after 2 years, what was the annual simple interest rate on
the savings account?

• I = PRT • Interest paid by bank


• 910=(7,000)(R)(2) • Principle (invested)
• 910 = (7,000)(2)R • Rate is unknown
• 910 = 14,000 R • Time is 2 years
14,000 14,000 • Regroup & Multiply
0.065 = R • Divide
6.5% = R • Change to %
6. A savings account is set up so that the simple interest earned on
the investment is moved into a separate account at the end of each
year. If an investment of $2,000 accumulate $360 of interest in the
account after 4 years, what was the annual simple interest rate on
the savings account?

• I = PRT • Interest paid by bank


• 360=(2,000)(R)(4) • Principle (invested)
• 360 = (2,000)(4)R • Rate is unknown
• 360 = 8,000 R • Time is 4 years
8,000 8,000 • Regroup & Multiply
0.045 = R • Divide
4.5% = R • Change to %
7. Sylvia bought a 6-month $1900 certificate of deposit. At the end
of 6 months, she received a $209 simple interest. What rate of
interest did the certificate pay?

• I=PRT • Interest paid by


209= 1900(R) (6/12) bank
209=(1900)(6/12)R • Principle (invested)
209=950R • Rate is unknown
950 950 • Time is 6 months
0.22 = R (divide by 12)
22% = R • Regroup & Multiply
• Divide
• Change to %

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