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Simple Interest

The document provides information about simple interest calculations including: 1) The factors that influence the amount paid back on a loan are the principal (how much was borrowed), time (how long it was borrowed for in years), and rate (what interest rate was charged annually). 2) The formula for simple interest is Interest = Principal x Rate x Time. The formula for the total amount to pay back (maturity value) is Amount = Principal + Interest. 3) The document provides examples of calculating simple interest for loans with given principal amounts, time periods, and interest rates and determining total amounts owed.

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Ron Robert M. Pecana
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© © All Rights Reserved
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Download as PPT, PDF, TXT or read online on Scribd
557 views

Simple Interest

The document provides information about simple interest calculations including: 1) The factors that influence the amount paid back on a loan are the principal (how much was borrowed), time (how long it was borrowed for in years), and rate (what interest rate was charged annually). 2) The formula for simple interest is Interest = Principal x Rate x Time. The formula for the total amount to pay back (maturity value) is Amount = Principal + Interest. 3) The document provides examples of calculating simple interest for loans with given principal amounts, time periods, and interest rates and determining total amounts owed.

Uploaded by

Ron Robert M. Pecana
Copyright
© © All Rights Reserved
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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SIMPLE INTEREST

August 29, 2018


If someone borrows money, what factors influence
how much is paid back?

Principal -How much was borrowed.


Time - How long it was borrowed for.
(in years)
Rate - What interest was charged.
(annual % rate)

Maturity Value = Principal + Interest


Interest = Principal �Rate �Time
I = P��
r t
Joe borrows P200000 from the bank at 6% simple
interest for 3 years. What interest does he owe,
and what is his total balance (amount to payback)
P = 200,000
r = 6% = 0.06
t=3
Interest Maturity Value
I = P��
r t F= P + I
I = 200,000 (0.06) (3) F= 200000 + 3600
I = 36000 F = 236000
Juan invests $5000 in bonds for 6 months at an
annual interest rate of 7%. How much interest
did he earn, and what is the balance in his account
P = 5000
r = 7% = 0.07
t = 6 months = 0.5 years
Interest Maturity Value
I = P��r t F = P + I
I = (5000)(0.07)(0.5) F = 5000 + 175
I = 175 F = 5175

Interest owed = $175 F = $5175


Find the simple interest and the Maturity Value.
1) $2000 at 4% for 9 mos.
P = 2000
r = 4% = 0.04
t = 9 mos. = 0.75 yrs.
I = P��r t
I = (2000)(0.04)(0.75)
I = $60

F = P + I
F= 2000 + 60
F = $2060
Find the annual simple interest rate.
1) $2000 earns $420 simple interest over 3 years.
P = 2000
I = 420
t = 3 years
I = P��r t
420 = (2000)(r)(3)
420 = 6000r
6000 6000
0.07 = r
Annual Interest Rate = 7%
Find the annual simple interest rate.
2) $625 simple interest is earned on a 2 year loan
of $5000. P = 5000
I = 625
t = 2 years
I = P��r t
625 = (5000)(r) (2)
625 = 10,000r
10,000 10,000
0.0625 = r
r = 6.25% or 6 %1
4
Find the principal amount invested.
1
3) Interest of $1650 is earned over 4 years at 5 %.
2
I = 1650
t = 4 years
r = 5.5% = 0.055
I = P��r t
1650 = (P)(0.055)(4)
1650 = 0.22P
0.22 0.22
7500 = P
Principal = $7500
Quick Draw for Points

• You will have 60 seconds to solve each


problem

• The text is Simple Interest Problems


Example 1: Finding Interest on a Loan

To buy a car, Jessica borrowed P15,000 for 3


years at an annual simple interest rate of 9%.
How much interest will she pay if she pays the
entire loan off at the end of the third year?

First, find the interest she will pay.


I=P 
r 
t Use the formula.
I = 15,000 
0.09 
3 Substitute. Use 0.09 for 9%.

I = 4050 Solve for I.


Example 1A: Finding Total Payment on a Loan

What is the total amount that she will repay?


You can find the total amount A to be repaid on a
loan by adding the principal P to the interest I.
Jessica will pay P4050 in interest.

P+I=A principal + interest = total amount


15,000 + 4050 = A Substitute.
19,050 = A Solve for A.

Jessica will repay a total of P19,050 on her loan.


Example 2

TJ invested P4000 in a bond at a yearly rate of


2%. He earned P200 in interest. How long was
the money invested?
I=P 
r 
t Use the formula.

200 = 4000 
0.02 
t Substitute values into
the equation.
200 = 80t
2.5 = t Solve for t.
The money was invested for 2.5 years, or 2
years and 6 months.
Example 3
Bertha deposited P1000 into a retirement
account when she was 18. How much will
Bertha have in this account after 50 years at a
yearly simple interest rate of 7.5%?

I=P 
r 
t Use the formula.

I = 1000 
0.075 
50 Substitute. Use 0.075
for 7.5%.
I = 3750 Solve for I.

The interest is P3750. Now you can find the total.


Example 3 Continued

P+I=A Use the formula.

1000 + 3750 = A Substitute.

4750 = A Solve for A.

Bertha will have $4750 in the account after 50 years.


Example 4

Mr. Mogi borrowed P9000 for 10 years to


make home improvements. If he repaid a total
of P20,000 at what interest rate did he borrow
the money?

P+I=A Use the formula.


9000 + I = 20,000 Substitute.
I = 20,000 – 9000 = 11,000 Subtract 9000
from both sides.
He paid P11,000 in interest. Use the amount of
interest to find the interest rate.
Example 4 Continued

I=P 
r 
t Use the formula.
11,000 = 9000 
r 
10 Substitute.

11,000 = 90,000 
r Simplify.

11,000= r Divide both sides by 90,000.


90,000

0.12 = r

Mr. Mogi borrowed the money at an annual rate of


about 12.2%.
Summary

• I = __________
• P=__________
• r = __________
• t = __________
• A=__________

• Interest Formula: I = ( )( )( )
• Amount Formula: A = ___ + ___
SUMMARY

Principal -How much was __________.


Time - How _____it was borrowed for.
(in_____)
Rate - What _______was charged.
(annual % rate)

Amount to Payback = Principal + Interest


Interest = ________�____ �______
I = P��
r t

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