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Simple Interest

Simple Interest. …is the dollar amount that we get paid for lending money or pay for borrowing money … is the amount of money that we deposit or borrow … is the percent that varies from bank to bank in which determines the amount of interest you pay or receive. Interest Principal Rate.

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Simple Interest

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  1. Simple Interest

  2. …is the dollar amount that we get paid for lending money or pay for borrowing money … is the amount of money that we deposit or borrow … is the percent that varies from bank to bank in which determines the amount of interest you pay or receive Interest Principal Rate

  3. the amount due on the total loan over a period of time the principal borrowed now a type of loan in which the lender collects the interest from the loan at the time the loan is made. the interest deducted from the loan (in a discounted loan) Future Value Present Value Discounted Loan Discount

  4. I = Prt I = interest P = Principal t = time in years r = rate (interest rate or apr) Simple Interest

  5. I = Prt I = (2000)(.06)(1) I = $120 You deposit $2000 in a savings account at Hometown Bank, which has a rate of 6%. Find the interest at the end of the first year.

  6. I = Prt I = (5000)(.032)(5) I = $800 You deposit $5000 in a savings account at Hometown Bank, which has a rate of 3.2%. Find the interest at the end of the first 5 years.

  7. A student took out a simple interest loan for $1800 for two years at a rate of 8% to purchase a used car. What is the interest on the loan? I = Prt I = (1800)(.08)(2) I =288

  8. A = P(1 + rt) A = future value P = Principal r = rate t = time Future Value

  9. You deposit $2000 in a savings account at Hometown Bank, which has a rate of 6%. Find the future value at the end of the first year. A = P(1 + rt) A = 2000(1+(.06)(1)) A = 2000(1.06) A = $2120

  10. You borrow $2500 from a friend and promise to pay back $2655 in six months. What simple interest rate will you pay?

  11. A = P(1 + rt) • 2655 = 2500(1 + .5r) • We use .5 because 6 months • is ½ or .5 of a year. • 2655 = 2500(1 + .5r) • 2655 = 2500 + 1250r • -2500 -2500 • 155 = 1250r • 1250 • r = .124 = 12.4% You borrow $2500 from a friend and promise to pay back $2655 in six months. What simple interest rate will you pay?

  12. TRY THIS ONE!!!! You borrow $5000 from a friend and promise to pay back $6800 in two years. What simple interest rate will you pay? A = P(1 + rt)

  13. HOMEWORK Find the Simple interest owed for the use of the money. • P=$4000, r =6%, t= 1 year 2. P=$7000, r =5%, t= 1 year 3. P=$180, r =3%, t= 2 years 4. P=$260, r =4%, t= 3 years 5. P=$5000, r =8.5%, t= 9 months 6. P=$18000,r =7.5%, t= 18 months

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