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Understanding Simple Interest: Formulas and Real-Life Applications

This lesson focuses on the concept of simple interest, including its definition, the relevant formula (I = p * r * t), and its application in real-life scenarios such as loans and savings. Students will learn about key terms like principal, rate, and annual interest, and how to manipulate the simple interest formula to solve various problems. Through examples involving loans and savings accounts, learners will apply the knowledge to calculate total interest accrued over specified periods, helping them understand the financial implications of borrowing and saving money effectively.

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Understanding Simple Interest: Formulas and Real-Life Applications

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  1. NAME: DATE: ______/_______/_______ Math-8 NOTES What: simple interest Why: To apply the simple interest formula to a variety of real-life interest scenarios. Vocabulary: simple interest-- the amount of money __________________or _________________ for the use of money. principal– amount of money deposited or _______________________________________ . rate-- determines the amount you _________ the bank; or, the amount the bank owes you. annual-- “per year.” You earn interest when you deposit $ in a bank. You pay interest when you borrow $ from a bank. Formula: I = p●r•t I = P = R = T= Notice that the 6% interest rate must be converted to a decimal (.06) when you use the formula! Examples: A student takes out an emergency loan for $600 to pay for school supplies. The interest rate is 6% annually. How much interest does the student have to pay after one year? I = p = r = t = An investor deposits $2,000 into a savings account. The account pays 7% interest annually. What is the total balance after two years? I = p = r = t =

  2. 3) Emilio’s father borrows $1,200 from the bank for a riding lawn mower. The interest rate is 8% per year. How much interest will he pay if he takes 3 years to repay the loan? • I = • p = • r = • t = • 4) Raini has $750 in a savings account that pays 3% simple interest. If Raini does not withdraw any money, how much will be in the account after 4 years? • I = • p = • r = • t = • Marcus invests $1,800 for 2 years and earns $144 in interest. What was the interest rate? • I = • p = • r = • t =

  3. DATE: ______/_______/_______ NAME:___________________________________ Math-8 Practice “SIMPLE INTEREST”

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