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Simple Interest

Simple Interest. Formula I = PRT. I = PRT. I = interest (amount of money the bank pays you or that you owe) P = Principal (amount invested or borrowed) R = Interest Rate usually given as a percent (must changed to decimal before plugging it into formula)

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Simple Interest

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  1. Simple Interest Formula I = PRT

  2. I = PRT • I = interest (amount of money the bank pays you or that you owe) • P = Principal (amount invested or borrowed) • R = Interest Rateusually 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

  3. Change % to decimal 1) 12% 2) 5% 3) 2 ½ % 4) 8.5% Change from decimal to % 5) .098 6) .455 Answers 1) .12 2) .05 3) .025 4) .085 5) 9.8% 6) 45.5% Activating Prior KnowledgeConverting Move 2 places to left & drop % sign Move 2 places to right & add % sign

  4. Solving for I Plug in numbers for P, R, & T. Then multiply Solving for other variables Plug in what you know. Multiply the numbers that are on same side then divide by that answer. I = PRTSolve for one of variables:

  5. I = PRT I= I=$450 Interest paid by bank is unknown Principal (invested) Rate changed to decimal Time is 2 years Multiply 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. (5,000) (.045) (2)

  6. I = PRT I= I=$1575 Interest paid by bank is unknown Principal (invested) Rate changed to decimal Time is 3 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. (7,000) (.075) (3)

  7. I = PRT 180= 180 = .06P .06 .06 3,000 = P Interest paid by bank Principal (invested) is unknown Rate changed to decimal Time is 1 year Multiply Divide 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? P (.06) (1)

  8. I = PRT 581= 581 = .07P .07 .07 $8,300 =P Interest paid by bank Principal (invested) is unknown Rate changed to 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? P (.07) (1)

  9. I = PRT 910= 910 = (7,000)(2)R 910 = 14,000 R 14,000 14,000 0.065 = R 6.5% = R Interest paid by bank Principal (invested) Rate is unknown Time is 2 years Regroup & Multiply Divide Change to % 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? (7,000) (R) (2)

  10. I = PRT 360= 360 = (2,000)(4)R 360 = 8,000 R 8,000 8,000 0.045 = R 4.5% = R Interest paid by bank Principal (invested) Rate is unknown Time is 4 years Regroup & Multiply Divide 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? (2,000) (R) (4)

  11. I=PRT 209= 209=(1900)(6/12)R 209=950R 950 0.22 = R 22% = R Interest paid by bank Principal (invested) Rate is unknown Time is 6 months (divide by 12) Regroup & Multiply Divide 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? 1900 (R) (6/12)

  12. 8. An investment earns 4.5% simple interest in one year. If the money is withdrawn before the year is up, the interest is prorated so that a proportional amount of the interest is paid out. If $2400 is invested, what is the total amount that can be withdrawn when the account is closed out after 2 months? • Interest paid by bank - Unknown • Principal (invested) • Rate is .045 • Time is 2 months (divide by 12) • Multiply • Now, since the money is being withdrawn, add the interest to the principal. • I=PRT • I= (.045) (2400) (2/12) I=$18 $18 + $2400 = $2418 $2418 will be withdrawn

  13. Commission commission ratesales = commission

  14. A commission is a fee paid to a person who makes a sale. It is usually a percent of the selling price. This percent is called the commission rate. commission ratesales = commission

  15. Additional Example 1 Continued A real-estate agent is paid a monthly salary of $900 plus commission. Last month he sold one condominium for $65,000, earning a 4% commission on the sale. How much was his commission? What was his total pay last month? He earned a commission of $2600 on the sale. Now find his total pay for last month. $2600 + $900 = $3500 commission + salary = total pay. His total pay for last month was $3500.

  16. Check It Out! Example 1 A car sales agent is paid a monthly salary of $700 plus commission. Last month she sold one sports car for $50,000, earning a 5% commission on the sale. How much was her commission? What was her total pay last month? First find her commission. 5%  $50,000 = c commission rate sales = commission 0.05  50,000 = cChange the percent to a decimal. 2500 = c Solve for c.

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