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SIMPLE INTEREST REVIEW

Explanation of Simple Interest

Ayisha1225
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SIMPLE INTEREST REVIEW

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  1. presents lessons in

  2. SIMPLE INTEREST SIMPLE INTEREST IS SO SIMPLE

  3. ABOUT SIMPLE INTEREST : BORROWING, LENDING, BUYING AND REPAYING When money is borrowed from a BANK, CREDIT UNION or ANY OTHER SOURCES, there is USUALLY a charge for borrowing that sum of money. This charge is called SIMPLE INTEREST. Keep in MIND that the bank DOES NOT give you the money for FREE!!!!

  4. Bank HOW THE BANKS CHARGE YOU This SIMPLE INTEREST will be charged yearly on the borrowed amount. They charge you (a certain rate)every year on the money you have borrowed. Hence, when the loan is repaid, it will consist of: • The money borrowed (called the principal) • The Simple Interest ( the extra amount that was charged every year for borrowing the loan) You

  5. HERE ARE SOME VIDEOS TO REINFORCE THE CONCEPT https://www.youtube.com/watch?v=XSGdzJSO3sQ Additional information. Also, if you also put money in the bank as a savings or shares. What are shares? https://www.youtube.com/watch?v=jiNIzPZ0hKY

  6. TERMS USED IN SIMPLE INTEREST PRINCIPAL : The total amount of money borrowed or put in the bank. RATE: The PERCENTAGE(%) on the borrowed amount which you are required to pay yearly. It is shown in PERCENTAGE(%) The Percentage is used to calculate the interest on the principal. TIME: The PERIOD given to repay the loan. (calculated in years) INTEREST/SIMPLE INTEREST: The extra amount to be paid or made on savings. This is the amount that the bank charges every year on the money which you borrowed(PRINCIPAL or LOAN). TOTAL AMOUNT: The TOTAL AMOUNT that the borrower repays the bank. It includes PRINCIPAL plus the INTEREST.

  7. OTHER SIMPLE INTEREST TERMS YOU NEED TO KNOW AND UNDERSTAND • ANNUAL or ANNUALLY : This means yearly or every year, per year • Per Annum : This means every year, each year, per year • MONTHLY INSTALLMENT: payments made each moth. This is the (AMOUNT) paid in a number of months. • To find monthly installment: • Step 1: Take the Amount (Principal + Interest) • Step 2: ( Change years to months ( years x 12) • Step 3 : Divide (Amount ÷ No. of Months)

  8. FORMULA TO FIND SIMPLE INTEREST PRINCIPAL INTEREST RATE TIME SIMPLE INTEREST = x x $ % per year years

  9. x x Rate Principal Time Simple Interest = 100 x P x R T S I or I = 100

  10. FORMULA TO FIND AMOUNT The amount of money borrowed The amount of money charged AMOUNT PRINCIPAL SIMPLE INTEREST = + $ $ $

  11. Amount = Simple Interest Principal + A = P + SI

  12. PRINCIPAL- The total amount of money borrowed.

  13. PRINCIPAL – can also mean the money you put in the bank to save and earn interest on.

  14. RATE: The PERCENTAGE(%) on the borrowed amount which you are required to pay yearly. It is shown in PERCENTAGE(%) % A lower interest rate (%) means It is not going to be a lot of money.

  15. TIME: The PERIOD given to repay the loan. 18 months 2 years 1 ½ or years 24 months 36 months 3 years 60 months ½ years 5 years 6 months

  16. Principal This is the amount of money you borrowed from the bank. Simple Interest This is the interest or extra money they charge you every year for borrowing that money. Amount : You have to pay back both amounts- Principal + Interest

  17. RECAP: SIMPLIFIED : Can you remember? Principal The sum of money borrowed, loaned or deposited Rate The rate of interest in percent(%) per annum (each year) The period of time YEARS to PAY Time Simple Interest The extra amount charge yearly on the loan taken. The PRINCIPAL added to the INTEREST (A = P + I) It is the total amount of money paid or earned. Amount

  18. WHAT IS MONTHLY INSTALLMENT • MONTHLY INSTALLMENT: payments made each month. This is the (AMOUNT) paid in a number of months. • To find monthly installment: • Step 1: Take the Amount (Principal + Interest) • Step 2: ( Change years to months ( years x 12) • Step 3 : Divide (Amount ÷ No. of Months)

  19. FINDING SIMPLE INTEREST a) Calculate the interest (S.I.) paid on a loan of $6000(P) at the rate of 6% per annum for a period of 2 years (T). b) Calculate the amount to be repaid. Step 2: Write your formula and follow it. Step 1: Pull out the information given: Principal (P) = $6000 Rate (R) = 6% Time = 2 years T x R x P S I = 100 S I = x x 2 6 6000 = $720 100

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