Press Ctrl-A ©G Dear 2009 – Not to be sold/Free to use Simple Interest Stage 6 - Year 11 General Mathematics Preliminary

2 Simple Interest (1/5) Interest The money paid to a borrower or investor for the use of money. Simple Interest The simplest form of interest calculation. Calculated by using only the initial investment. Formula I =Prn Simple Interest Principal or Money Number of periods Rate of interest Click on letters

3 Simple Interest Example (2/5) Calculate Interest on a loan of $ at 8.9% per annum for 7 years. I = P n r = x 7 8.9% = = x = $ How much has been paid out on the loan? A = P + I = = $40 575

4 Simple Interest Example (3/5) Calculate return on an investment of $1 200 at 7.5% per annum for 5 years. I = P n r = 1 200x 5 7.5% = = x = $450 How much is the investment now worth? A = P + I = = $1 650

5 Simple Interest Example (4/5) Calculate return on an investment of $900 at 5% per annum for 9 months. I = P n r = months = 9 12 = x 0.05 = $33.75 How much is the investment now worth? A = P + I = = $ % = = x

6 Simple Interest Example (5/5) How long will it take to earn $100 on an investment of $500 at 10% per annum. I = P n r 100 = 500 r = x = 50n = 0.10 nx n = 2 years ÷50