Lesson 7.8: Simple Interest
Lesson 7.8: Simple Interest
Lesson 7.8: Simple Interest
8: Simple Interest
If someone borrows money, what factors influence
how much is paid back?
Balance = P + I
Balance = 2000 + 60
Balance = $2060
Find the annual simple interest rate.
1) $2000 earns $420 simple interest over 3 years.
P 2000
I 420
t 3 years
I P r t
420 (2000)(r)(3)
420 6000r
6000 6000
0.07 r
Annual Interest Rate 7%
Find the annual simple interest rate.
2) $625 simple interest is earned on a 2 year loan
of $5000. P 5000
I 625
t 2 years
I P r t
625 (5000)(r) (2)
625 10,000r
10,000 10,000
0.0625 r
r 6.25% or 6 %1
4
Find the principal amount invested.
1
3) Interest of $1650 is earned over 4 years at 5 %.
2
I 1650
t 4 years
r 5.5% 0.055
I P r t
1650 (P)(0.055)(4)
1650 0.22P
0.22 0.22
7500 P
Principal $7500
Quick Draw for Points
200 = 4000
0.02
t Substitute values into
the equation.
200 = 80t
2.5 = t Solve for t.
The money was invested for 2.5 years, or 2
years and 6 months.
Example 3
Bertha deposited $1000 into a retirement
account when she was 18. How much will
Bertha have in this account after 50 years at a
yearly simple interest rate of 7.5%?
I=P
r
t Use the formula.
I = 1000
0.075
50 Substitute. Use 0.075
for 7.5%.
I = 3750 Solve for I.
I=P
r
t Use the formula.
11,000 = 9000
r
10 Substitute.
11,000 = 90,000
r Simplify.
0.12 = r
• I = __________
• P=__________
• r = __________
• t = __________
• A=__________
• Interest Formula: I = ( )( )( )
• Amount Formula: A = ___ + ___
SUMMARY