November 28, 2011
Simple Interest:
I=Prt
I=Interest
P=Principal
r=interest rate
t=time period
Future Value for Simple Interest:
A = P + I or A=P(1+rt)
A=amount after interest, I, has
been added to the principal, P.
November 28, 2011
1. Calculate the simple interest due on a 6
month loan of $3500 if the annual
interest rate is 8%.
November 28, 2011
2. The simple interest charged on a fourmonth loan of $3000 is $150. Find the
interest rate.
November 28, 2011
3. A sum of $2000 is invested at 4.6% simple
interest for 2 years. Find the amount of
interest earned.
November 28, 2011
4. To pay for Christmas gifts for your
family, you borrow $200 from a loan
shark and agree to pay $215 at the
end of the month. What is the
interest rate?
November 28, 2011
5. Find the future value of a loan of $3,000
made at 6.5% for 2 years.
November 28, 2011
6. You plan to save $2,500 for a trip to
Europe in 18 months. You decide to
invest your money into a simple-interest
savings account at a rate of 4%. How
much must you invest now in order to
have $2,500 in 18 months?
November 28, 2011
7. Suppose you borrow $3,500 for 3 years.
If the future value of your loan is
$4,250, what was the interest rate?
November 28, 2011
Some lenders collect the interest from the
amount of the loan at the time that the loan
is made. This type of loan is called a
discounted loan. The interest that is
deducted from the loan is the discount.
November 28, 2011
8. You borrow $10,000 on a 9% discounted
loan for a period of 3 years.
a. What is the loan's discount?
b. Determine the net amount of money you
receive.
c. What is the loan's actual interest rate?
November 28, 2011
9. You borrow $5,000 on a 12% discounted
loan for a period of 2 years.
a. What is the loan's discount?
b. Determine the net amount of money you
receive.
c. What is the loan's actual interest rate?
November 28, 2011
Homework: p.19-20 #1-9