1. Section 7.7 Simple Interest
Algebra Concepts
Section 7.7
Simple Interest

2. Principal- money that a person deposits in an account

3. Interest- money the bank pays you for having the money in their bank.

4. Interest rate- the percentage that the bank pays you to keep your money.

5. So- how does the bank make money?

6. People borrowing money pay the bank extra money (interest)
People borrowing money pay the bank extra money (interest). The bank charges borrowers a higher interest rate than the interest rate they pay savers. Why don’t savers just loan their money out to borrowers?

7. Most people borrow money when they buy a house
Most people borrow money when they buy a house. They borrow money from a bank and pay the money back over many years (15,20 or 30). This loan is called a mortgage.

8. Some people buy more items with a charge card than they can pay for and they pay a very high interest rate to the charge card company.

11. Find the simple interest
#1 Account with $1000 earning 7% for three years. #2 Account with $25,000 earning 3% for five

12. If the time is in months, you have to convert months to years before
you use the formula.
#3 Find the simple interest for an account with
$30,000 earning 8% for six months.

13. Simple interest is the amount you would earn over a period of years if you took the interest money out of the account each year. Normally the bank just adds the interest to your account.
If you leave the interest in the account you will earn money on the interest they paid you each year.

14. Making a table with the bank balance
This bank gives the saver interest every month.

15. Year
Starting balance
Interest
Ending balance
You deposit $500 in the bank. The bank is paying you 6% simple interest per year. Make a table with the following headings. Each year the new balance will be the current balance plus the interest the bank deposited into the account.