Interest on Loans Section 6.8

Objectives Calculate simple interest Calculate compound interest Solve applications related to credit card payments

Objective 1: Calculate simple interest

Objective 1 Interest - fee charged for borrowing money –Or money paid on savings accounts Interest rate – percent of money borrowed Principal – amount of money borrowed Simple interest – interest charged one time only Simple interest = Principal x Interest rate x Time Time is in number of years or fraction of a year

Objective 2: Calculate compound interest

Objective 2 Compound interest – interest earned at end of one time period is added to principal and earns interest during next time period Interest rate for each time period is total interest for year divided by number of time periods in the year Compound Interest Tables –Ending balance = Original principal x compound factor –Total interest earned = ending balance – original principal

Objective 3: Solve applications related to credit card payments

Objective 3 Minimum payment = Unpaid balance x Minimum payment rate Monthly interest = Unpaid balance x Interest rate ÷ 12 Amount applied to unpaid balance = Minimum payment – Interest charge Unpaid balance = Beginning balance – amount applied to unpaid balance