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Simple Interest

Simple Interest. Objectives. Calculate the simple interest on a loan. Calculate the future value of a simple interest loan. Calculate the present value of a simple interest loan given the future value. Calculate the payments for an add-on interest loan.

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Simple Interest

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  1. Simple Interest

  2. Objectives • Calculate the simple interest on a loan. • Calculate the future value of a simple interest loan. • Calculate the present value of a simple interest loan given the future value. • Calculate the payments for an add-on interest loan. • Calculate the average daily balance for a billing period. • Calculate the finance charges for a billing period.

  3. Vocabulary • present value • principal • future value • interest rate • simple interest • loan amount • maturity value • add-on interest • average daily balance

  4. Formulas Simple Interest Future Value Formula Interest Earned Interest Paid

  5. Find the simple interest on a loan amount of $8950 at 9½% annual interest for 10 months.

  6. Find the future value of $3670 deposited at 2¾% annual simple interest for 7 years.

  7. How much must be deposited now atannual simple interest so that in 2 years and 7 months an account will contain $3000?

  8. Sam Spade inherited $7,000. He wants to buy a used car, but the type of car he wants typically sells for around $8,000. If his money can earn 6½% annual simple interest, how long must he invest his money?

  9. Ray and Teresa Martinez buy a bedroom set at Fowler’s Furniture for $3,700. They put $500 down and finance the rest through the store at 9.8% add-on interest. If they agree to make 36 monthly payments, find the size of each payment.

  10. The activity on Denise Helling’s Sears account for one billing period is shown below. Find the average daily balance and the finance charge if the billing period is March 1 through March 31. The previous balance was $157.14, and the annual interest rate is 21%.

  11. Find the simple interest on a loan amount of $35037 at 6% annual interest for 2 years.

  12. Find the simple interest on a loan amount of $5682 at 11¾% annual interest for 278 days.

  13. Find the maturity value of $2720 borrowed at 12¾% annual simple interest for 275 days.

  14. Find the present value of a future value $420 at 5½% annual simple interest for 2 years.

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