1. Lesson 5-8
Simple Interest

2. Definition
Interest- the amount of money paid or earned for the use of money
FORMULA FOR INTEREST - I = p r t
I = interest
P - principal (money invested or borrowed)
R - rate - annual interest rate as a decimal.
T - Time written in years

3. Example 1 Find Simple Interest
Find the simple interest for $500 invested at 6.25% for 3 years.
I = prt
I = 500   3
I = $93.75

4. Practice Problem Find Simple Interest
Find the simple interest for $2000 invested at 5.5% for 4 years.
I = prt
I = 2000   4
I = $440

5. Example 2 Find The Total Amount
Find the total amount of money in an account where $95 is invested at 7.5% for 8 months.
I = prt
I = 95  ⅔
I = $4.75
Total = = $99.75

6. Practice Problem Find The Total Amount
Find the total amount in an account where $250 is invested at 6% for 6 months.
I = prt
I = 250  0.06  ½
I = $7.5
Total = = $257.50

7. Example 3 Find The Interest Rate
Tonya borrowed $3,600 to buy a used car. She will be paying $ each month for the next 36 months. Find the simple interest rate for her loan.
Find the total Tonya will pay. $  36 = $4734
Find the interest. $4734 – $3600 = $1134
I = prt
1134 = 3600  r  3 (years)
0.105 = r Multiply by 100 to turn it into a percentage
r = 10.5%

8. Practice Problem Find The Interest Rate
Gerardo borrowed $4,500 from his bank for home improvements. He will repay the loan by paying $120 a month for the next four years. Find the simple interest rate of the loan.
Find the total Gerardo will pay. $120  48 = $5760
Find the interest. $5760 – $4500 = $1260
I = prt
1260 = 4500  r  4
0.07 = r Multiply by 100 to turn it into a percentage
r = 7%