Math: Simple Interest
Find the SIMPLE INTEREST: Emmy opens a savings account with a deposit of $300. He will earn 1.6% simple interest each year on his money. How much interest will he earn in 5 years?
$24.00 ----------------------------------------------- P = $300 R = 1.6% = 0.016 T = 5 years I = 300 x 0.016 x 5 = 24
What are the four things you must consider when solving problems involving interest rate?
1.) The principal, P, (amount borrowed) 2.) The interest rate, R (the fee or tax expressed as a percentage) 3.) The length of the loan or time, T 4.) The amount of simple interest, I (the amount of the fee paid) To find the amount of simple interest (I), you multiply the principal (P) times the interest rate (R). This is multiplied by the number of years (T).
What is interest?
A fee you pay for borrowing money (A bank pays you interest when you keep money in their bank. You pay interest when you borrow money from a bank.)
Find the PRINCIPAL: Thor opened a savings account that earns 1.5%. Thor says that if he does not add or subtract from the account he will earn $240 interest after 10 years. How much did Thor deposit into the account?
Interest = $240 Interest Rate = 1.5% = 0.015 Time = 10 years P = ? I = PRT ----------------------------------------------- 240 = P x 0.015 x 10 240/0.015 x 10 = P $1600 = Principal
Find the INTEREST RATE: Chuck got a loan to buy a used a used batmobile for $3,400. He pays $8.50 interest a month. What is the interest rate on the loan?
Since we do not know the length of the loan, we will calculate the interest for one year (T = 1). This will also keep the math more simple. I = P x R ----------------------------------------------- I = $8.50 x 12 months = $102 P = $3,400 102 = 3400 x R (Divide both sides by 3,400) 0.03 = R = 3% (Interest rate by definition is a percentage)
What is principal?
The amount of money borrowed
What is interest rate?
The fee you pay expressed as a percentage
What is simple interest?
The interest that is applied to a principal
How you do find the simple interest?
To find the amount of simple interest (I), you multiply the principal (P) times the interest rate (R). In math terms: I = P x R