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Understanding Simple Interest Calculations

Learn how to calculate simple interest on savings, loans, and credit cards using the formula and examples provided. Improve your financial literacy with practical scenarios.

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Understanding Simple Interest Calculations

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  1. Lesson Menu Main Idea and New Vocabulary Example 1: Find Interest Earned Example 2: Find Interest Earned Example 3: Find Interest Paid on a Loan Example 4: Find Total Paid on a Credit Card

  2. Solve problems involving simple interest. • principal • simple interest Main Idea/Vocabulary

  3. Find Interest Earned FINANCIAL LITERACY Jose’s savings account pays 3.25% interest. He has $1,200 in his account. How much interest will he earn in 3 years? I =prtFormula for simple interest I =1,2000.03253 Replace p with $1,200, r with 0.0325, and t with 5. I = 117 Simplify. Answer: Jose will earn $117 in interest in 3 years. Example 1

  4. CERTIFICATE OF DEPOSIT Perry has a Certificate of Deposit (CD) that pays 4.9% interest. He started the CD with $1,000. The CD will mature in 1 year. How much interest will he have earned after one year? A. $4,900 B. $490 C. $49 D. $4.90 Example 1 CYP

  5. 9 months = or 0.75 year. Write the time as years. Find Interest Earned FINANCIAL LITERACY Jose’s savings account pays 3.25% interest. He has $1,200 in his account. How much interest will he earn in 9 months? I =prtFormula for simple interest I =1,2000.03250.75 Replace p with $1,200, r with 0.0325, and t with 0.75. Example 2

  6. Find Interest Earned I = 29.25 Simplify. Answer: Jose will earn $29.25 in interest in 9 months. Example 2

  7. MONEY MARKET Debbie has a money market savings account that pays 4.25% interest. She has $900 in her account. How much interest will she earn in 9 months? A. $193.24 B. $38.25 C. $28.69 D. $27.00 Example 2 CYP

  8. Find Interest Paid on a Loan LOANS Phoebe borrowed $2,600 from a bank to help pay for her college tuition. The interest rate is 8% per year. How much simple interest will she pay if it takes her 5 years to repay the loan? I =prtFormula for simple interest I =2,6000.085 Replace p with $2,600, r with 0.08, and t with 5. I = 1,040 Simplify. Answer: Phoebe will pay $1,040 in interest in 2 years. Example 3

  9. AUTO LOAN Autumn borrowed $4,100 from a bank to help pay for a car. The interest rate is 7.5% per year. How much simple interest will she pay if it takes her 6 years to repay the loan? A. $18,450 B. $1,845 C. $630 D. $307.50 Example 3 CYP

  10. I =3650.135Replace p with $365, r with 0.135, and t with . Find Total Paid on a Credit Card CREDIT CARDS Mariano paid for a plane ticket that cost $365 using a credit card. His card has an interest rate of 13.5%. If he has no other charges on his card and does not pay off his balance by the end of the month, how much money will he owe after one month? I =prtFormula for simple interest Example 4

  11. Find Total Paid on a Credit Card I= 4.11 Simplify. The interest owed after one month is $4.11. Answer: So, the total amount owed would be $365 + $4.11 or $369.11. Example 4

  12. CREDIT CARDS Fred paid for a new TV that cost $1,065 using a credit card. His card has an interest rate of 12.9%. If he has no other charges on his card and does not pay off his balance by the end of the month, how much money will he owe after one month? A. $82.56 B. $137.39 C. $1,076.45 D. $1,147.60 Example 4 CYP

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