AH HA! I can calculate the cost of of repaying a loan or gaining interest.

Simple Interest & compound Interest

Compound Interest https://www.youtube.com/watch?v=Uka5owZdFDI When money is borrowed, the amount borrowed is known as the loan principal. For the borrower, interest is the cost of using the principal. The money you pay to borrow money. Investing money is the same as making a loan. The interest received is the return on the investment.

Calculating the amount of interest depends on the interest rate and the interest period. Types of interest: Simple interest - the interest rate multiplied by an unchanging principal amount Compound interest - the interest rate multiplied by a changing principal amount The unpaid interest is added to the principal balance and becomes part of the new principal balance for the next interest period.

Simple Interest

is money added onto the original amount saved (earned) or borrowed (charged). Simple Interest

Simple Interest Formula I = prt I (Interest) - The amount earned or the amount charged p (Principal)- The amount borrowed or deposited r (Rate) – Percent at which the interest is charged t (Time)- In years or months

Calculating Simple Interest How much money would you pay in interest if you borrowed $1,600 for 1 ½ years at 16% APR? Convert the percent to a decimal. 16% = .16 I = prt I = $1,600 x .16 x 1.5 I = $384

Cathan bought a beautiful house for $350,000 Cathan bought a beautiful house for $350,000. His loan was for 30 years at 6.5% APR. How much money will he end up paying in interest? 6.5% = . 065 I = prt I = $350,000 x .065 x 30 I = $682,500

Brittany saved her $9,000 for 2 ½ years at 4 Brittany saved her $9,000 for 2 ½ years at 4.25% APR in a CD, to go on a month long vacation with her family. How much did she earn in interest? 4.25% = . 0425 I = prt I = $9,000 x .0425 x 2.5 I = $956.25

Compound Interest Formula A = p(r + 1)t A (Amount) - The total amount that is owed principal + interest I (Interest) - The amount earned or the amount charged p (Principal)- The amount borrowed or deposited r (Rate) – Percent at which the interest is charged t (Time)- In years or months

Erik invests $10,000 in an account that pays 8 Erik invests $10,000 in an account that pays 8.5% interest per year, compounded annually. What is the amount of money that he will have after 3 years? 8.5% = . 085 A = p(r + 1 )t A = $10,000(.085 + 1)3 A = $12,772.89

Hallie decides to invest $3000 in a mutual fund that earns 12 Hallie decides to invest $3000 in a mutual fund that earns 12.3 % compounded annually. What will her investment be worth in 5 years? How much did she gain in interest after 5 years? A = p(r + 1 )t A = $3,000(.0123 + 1)5 A = $

Brittany saved her $9,000 for 2 ½ years at 4 Brittany saved her $9,000 for 2 ½ years at 4.25% APR in a CD, to go on a month long vacation with her family. How much did she earn in interest? 4.25% = . 0425 I = prt I = $9,000 x .0425 x 2.5 I = $956.25

Garza put $8,500 into an 18 month CD. The interest rate is 3 Garza put $8,500 into an 18 month CD. The interest rate is 3.25% How much money will Garza earn in interest? 3.25% = . 0325 I = prt I = $8,500 x .0325 x 1.5 I = $414.38

Riley bought a new truck for $25,000 Riley bought a new truck for $25,000. He took out a loan for 5 ½ years with 7.75% APR. How much will Riley end up paying in interest? 7.75% = . 0775 I = prt I = $25,000 x .0775 x 5.5 I = $10,656.25

Peyton bought a new sports car for $28,500 Peyton bought a new sports car for $28,500. She financed her car for 6 years at 6.75%APR. How much will she end up paying for interest on her car? 6.75% = . 0675 I = prt I = $28,500 x .0675 x 6 I = $11,542.50