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.

simple interest ( I )=

principal( P ) × annual interest rate( R ) × time( T )(years)

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 .

= 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.

principal

the principal is the amount of money borrowed or deposited.

simple interest

simple interest is money or earned only on the principal.

Algebra:

(simple interest)→ I = P ←(principal) R←( rate) T← ( time in years)

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?

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.

= 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?

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%

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?

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.

= 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.