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    Simple Interest FINAL

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    luke.stanley

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    © All Rights Reserved
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    Simple Interest FINAL

    Uploaded by

    luke.stanley
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    Download as pptx, pdf, or txt
    4 views20 pages

    Simple Interest FINAL

    Uploaded by

    luke.stanley

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    You are on page 1of 20

    SIMPLE

    INTEREST
    2

    OBJECTIVES
    ➜ Identify interest, rate of interest,
    principal and amount
    ➜ Find simple interest on given
    investments or loans
    ➜ Find unknown values given simple
    interest (rate, interest, time,
    principal)
    ➜ Solve word problems
    3
    INTRODUCTION

    2 YEARS LATER,
    IF MISS INVESTS MISS EARNS
    MONEY IN A BANK, MONEY FROM
    SHE EXPECTS TO HER
    EARN MONEY FROM INVESTMENT,
    THIS INVESTMENT. THIS MONEY IS
    THE MONEY SHE CALLED THE
    INVESTS IS CALLED INTEREST.
    THE PRINCIPAL.
    4
    INTRODUCTION

    THE BANK CALCULATES


    THE MONEY IS
    THE INTEREST PAYABLE
    INVESTED FOR A AT A FIXED PERCENT
    LENGTH OF TIME PER ANNUM, WHICH IS
    CALLED THE CALLED THE ANNUAL
    PERIOD OF RATE OF INTEREST
    (OR THE INTEREST
    INVESTMENT,
    RATE).
    WHICH IS THE
    TIME IN YEARS.
    5
    INTRODUCTION

    WHEN THE
    AT THE END OF PRINCIPAL
    THE PERIOD OF REMAINS THE
    INVESTMENT, SAME
    THE AMOUNT THROUGHOUT AN
    COLLECTED IS INVESTMENT, THE
    THE SUM OF INTEREST IS
    THE PRINCIPAL CALLED SIMPLE
    AND THE INTEREST.
    6

    CALCULATING SIMPLE INTEREST

    THE FORMULA USED FOR CALCULATING


    SIMPLE INTEREST IS:
    7

    A SIMILAR SITUATION ARISES IF MONEY IS


    BORROWED FROM A BANK. IN THIS CASE:

    ➜ The principal is the money borrowed from


    the bank by the borrower.
    ➜ The interest is earned by the bank and is
    payable by the borrower.
    ➜ The amount payable to the bank at the
    end of the loan period is the sum of the
    principal and the interest.
    8

    In the simple interest formula,

    I is the simple interest in dollars

    p is the principal in dollars

    r is the rate percent per annum

    t is the time in years


    9

    “
    ➜ To calculate the
    amount of money
    paid at the end you
    add the interest to
    the principal.
    10

    When solving
    financial
    mathematics
    problems always
    specify all variables
    and their values.
    11

    EXAMPLE ONE
    London borrowed $5000 from a credit union at
    12.5% per annum for 2 years.
    Calculate:
    a. The simple interest payable
    12

    EXAMPLE ONE CONTINUED


    b. The amount repaid at the end of 2
    years.

    P = $5000
    I = $1250
    A = $5000 + $1250
    = $6250
    13

    EXAMPLE TWO
    a. To buy furniture for a new apartment, Megan
    borrowed $4000 at 8% simple interest for 3
    years. How much interest will she pay?
    P = $4000; R = 8%; T= 3
    14

    EXAMPLE TWO CONTINUED


    b. The amount repaid at the end of the
    3 years?
    A=P+I
    P = $4000
    I = $960
    A = $4000 + $960
    =$4960
    15

    TRY THIS!
    Jamari, saves $4000 in the bank for 3
    years at 4% per annum.
    A. What is his interest at the end of
    the three years?
    B. How much money does he have?
    16

    TRY THIS TOO!!


    Kayla, borrows $750 to help pay for his
    tuition at UWI. He has 1 year to pay off
    the loan at a rate of 5% per annum.
    a. Calculate the interest on $750 for
    the 1 years.
    b. Hence, calculate how much is owed
    for the 1 years
    17

    ACTIVITY
    ➜ Copy and Complete the table
    Principal Interest Time Simple Interest Amount
    (Borrowed) Rate payable

    $400 1% 3 years

    $2500 4% 2 years

    $36, 000 5% 4 years

    $85, 300 7% 5 years

    $608, 000 10% 7 years


    18

    ACTIVITY
    ➜ Copy and Complete the table.
    Principal Interest Rate Time Simple Amount
    (Invested) Interest collected
    $700 5. 25% 2 years

    $800 7.5% 3 years

    $1200 8.25% 5 years

    $8500 10.5% 4 years

    $34, 900 11. 75% 5 years


    19

    ACTIVITY
    ➜ Patrick deposited $5250 in a finance
    company. The company pays simple
    interest at the rate of 6.25% per annum.
    a. Calculate the simple interest earned
    after:
    (i) 1 year
    (ii) 2 years
    (iii)3 years
    b. Determine the amount of money Patrick
    collected after:
    20

    ACTIVITY
    1. Lennox needed $5400 to buy a
    refrigerator. He borrowed this sum of
    money for 2 years at 13% per annum from
    a bank. What amount of money does he
    owe the bank?
    2. If a Credit Union has an interest rate of
    10%, calculate the simple interest when
    10,000 is invested for:
    a. 6 months
    b. 9 months

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