Lesson 5 8 Simple Interest Definition Interest the

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 1 Find Simple Interest Find the simple interest for $500 invested at 6. 25% for 3 years. I = prt I = 500 0. 0625 3 I = $93. 75

Practice Problem Find Simple Interest Find the simple interest for $2000 invested at 5. 5% for 4 years. I = prt I = 2000 0. 055 4 I = $440

Example 2 Find The Total Amount Find the total amount of money in an account where $95 is invested at 7. 5% for 8 months. I = prt I = 95 0. 075 ⅔ I = $4. 75 Total = 95 + 4. 75 = $99. 75

Practice Problem Find The Total Amount Find the total amount in an account where $250 is invested at 6% for 6 months. I = prt I = 250 0. 06 ½ I = $7. 5 Total = 250 + 7. 50 = $257. 50

Example 3 Find 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 = $4734 Find the interest. $4734 – $3600 = $1134 I = prt 1134 = 3600 r 3 (years) 0. 105 = r Multiply by 100 to turn it into a percentage r = 10. 5%

Practice Problem Find 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 = $5760 Find the interest. $5760 – $4500 = $1260 I = prt 1260 = 4500 r 4 0. 07 = r Multiply by 100 to turn it into a percentage r = 7%