Calculating Interest Interest the cost of Simple Interest

Calculating Interest • Interest = the cost of ______ • Simple Interest: – only uses the original _______amount to determine interest – formula to determine interest: Interest = Principal • Rate • Time – Principal = ______ amount borrowed – rate = interest rate expressed as a ______ – time = number of _____ the money is being ________

Determining Simple Interest Example #1 Find the interest amount on $3, 000 at 8% interest for one year. • Step 1: Interest = principal • rate • time • Step 2: Interest = 3, 000 • . 08 • 1 – Convert 8% to _______ form (. 08) formula. • Step 3: Interest = $240 paid for the ______ of $3, 000 for one _____.

Determining Simple Interest Example #2 Find the future value of $5, 000 invested at 6% for three years using simple interest. – Step 1: Interest earned = principal • rate • _____ – Step 2: Interest earned = 5, 000 • . 06 • 3 =$900 • Convert 6% to ______form (. 06) formula. – Step 3: Future value = interest earned + principal • FV = $900 + $5, 000 • FV = $______

Determining Simple Interest Example #3 Find the interest on $2, 000 borrowed at 9% for 73 days. • Step 1: Interest = principal • ______ • time • Step 2: Interest = 2, 000 • . 09 • (73/365) – Convert 9% to _______form (. 09) formula. – Convert 73 days to _____by dividing by 365 days/year. • Step 3: Interest = 2, 000 ×. 09 ×. 20 – Interest = $____

If you invested $200. 00 in an account that paid simple interest, find how long you’d need to leave it in at 4% interest to make $10. 00. enter in formula as a decimal I = PRT 10 = (200)(0. 04)T 1. 25 yrs = T Insert this in your notes! Typically interest is NOT simple interest but is paid semi-annually (twice a year), quarterly (4 times per year), monthly (12 times per year), or even daily (365 times per year).