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

2. Simple Interest & compound Interest

3. Compound Interest
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.

4. 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.

5. Simple Interest

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

7. 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

8. 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

9. 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

10. 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% =
I = prt
I = $9,000 x x 2.5
I = $956.25

11. 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

12. 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( )3
A = $12,772.89

13. 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( )5
A = $

14. 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% =
I = prt
I = $9,000 x x 2.5
I = $956.25

15. 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% =
I = prt
I = $8,500 x x 1.5
I = $414.38

16. 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% =
I = prt
I = $25,000 x x 5.5
I = $10,656.25

17. 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% =
I = prt
I = $28,500 x x 6
I = $11,542.50