## 11 terms · terms and formulas from chapter 4, section 4.

### Essential question:

how can you find the amount of a simple interest earned on a savings account? How can you find the amount of interest owed on a loan?

### Simple interest

simple interest is money earned on a savings account or an investment. It can also be money you pay for borrowing money.

### you put $100 in a savings account. The account earns 6% interest per year. find the interest earned and the balance at the end of six months.

I= PRT . write the simple interest formula

= 100(0.06)[6/12) substitute values

=3 multiply

at the end of six months, you earn $3 in interest. So, your balance is $100 + $3 = $103 .

### Interest

is the money paid or earned for the use of money. The PRINCIPAL is the amount of money borrowed or deposited.

###
FINDING INTEREST EARNED:

You put $500 in a savings account. The account earns 3% simple interest per year. What is the interest earned after 3 years? what is the balance after 3 years?

I= PRT write the simple interest formula

= 500 ( 0.03)(3) substitute 500 for P, 0.03 for R and 3 for T.

= 45 multiply

so the interest earned is $45 after 3 years.

To find the balance, add the interest to the principal.

so, the balance is $500 + $45= $545 after 3 years.

###
FINDING AN ANNUAL INTEREST RATE:

you put $ 1000 in an account. The account earns $100 simple interest in 4 years. What is the annual interest rate?

I= PRT write the simple interest form

100= 1000(R)(4) substitute 100 for I, 1000 for P, and 4 for T.

100= 4000 R simplify

0.025= R divide each side by 4000

The annual interest rate of the accounts is 0.025 or 2.5%

###
FINDING AMOUNT PAID ON A LOAN

you borrow $600 to buy a violin. The simple interest rate is 15%. You pay off the loan after 5 years. How much do you pay for the loan?

I= PRT write the simple interest form

= 600(0.15)(5) substitute 600 for P, 0.15 for R and 5 for T

=450 multiply

To find the amount you pay, add the interest to the loan amount.

So, you pay $600 + $450= $1050 for the loan.

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