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CHAPTER FIVE SAVINGS ACCOUNTS

CHAPTER FIVE SAVINGS ACCOUNTS. LESSON FOUR SIMPLE INTEREST. Interest- The amount of money paid for the use of a lender’s money. Simple Interest- Interest paid only on the original principal. Principal- The amount of money earning interest.

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CHAPTER FIVE SAVINGS ACCOUNTS

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  1. CHAPTER FIVESAVINGS ACCOUNTS LESSON FOUR SIMPLE INTEREST

  2. Interest- The amount of money paid for the use of a lender’s money. • Simple Interest- Interest paid only on the original principal. • Principal- The amount of money earning interest. • Annual Interest rate- The percent of the principal earned as interest in one year. • Time- REPRESENTED IN YEARS ONLY • 6 years = 6 • 6 months = 6/12 = 0.5 • 6 days = 6/365 = 0.01643836 • Interest = Principal x Rate x Time • I =prt • Amount = Principal + Interest • A = P + I

  3. Example 1: Joyce Tyler deposits $9,000 in an account that pays an annual 5.5% interest rate. Determine the simple interest and the amount in the account for (a) 3 years, (b) 3 months, and (c) 3 days. • (a) • I = 9,000 x 0.055 x 3 • I = $1,485 • A = 9,000 + 1,485 • A = $10,485 • (b) *Convert 3 months to years • I = 9,000 x 0.055 x .25 • I = $123.75 • A = $9,123.75 • (c) *Convert 3 days to years • I = 9,000 x 0.055 x 0.0082… • I = $4.07 • A = $9,004.07

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  5. Example 2: Martin Ellis earned $150.00 in simple interest in 8 months at an annual interest rate of 6%. How much money did he invest? • I =prt • 150 = p x 0.06 x (8/12) • 150 = p x 0.04 • p = $3,750 (amount invested)

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  7. Review #1 • George Flower deposits $2,500 in an account that pays an annual 3.75% interest rate. Determine the simple interest and the amount in the account for (a) 2years, (b) 2 months, and (c) 2 days.

  8. Review #2 • Sally Mae deposited $2,175.00 and earned $384.00 in simple interest in 2 years. What is her annual interest rate?

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