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Simple Interest

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by

vivian c

on 15 November 2012

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Transcript of Simple Interest

8.1 Simple Interest WHAT IS IT?

Simple Interest

The total AMOUNT: the total value of an investment or a loan

I = Prt
A = P + I
A = P + Prt
A = P ( 1 + rt )

A: amount

I : interest

P : principal

r : interest rate, expressed as a decimal

t : the same period as the interest rate, usually per year FORMULAS TERMS

PRINCIPAL: a sum of money that is borrowed or invested

INTEREST: money you earn from an investment
OR
the cost of borrowing money LEARNING TOOLS How much money does Iris owe us? WHY DO WE NEED TO KNOW SIMPLE INTEREST? Simple interest is something that, if not already, could affect our lives in the future.

But why? When we deposit money into a savings account at a bank, interest can be collected at a certain rate, depending on the situation, company, bank, etc. EXAMPLE:

Carmen deposits $3000 into a savings account. The rate of simple interest is 6%/a.

How much money does Carmen gain in her account each year from interest? I = Prt
I = (3000)(0.06)(1)
I = $180 The interest is $180 per year.
This means that Carmen gains $180 each year on simple interest based upon her initial deposit into her savings account. Total Amount: INTEREST + PRINCIPAL: SIMPLE INTEREST: interest earned or paid only on the original sum of money that was invested or borrowed
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