Simple Interest

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Simple Interest

  1. 1. SIMPLE <br />INTEREST<br />Since this section involves what can happen to your money, it should be of INTEREST to you!<br />
  2. 2. IMPLE INTEREST DEFINITION<br />Interest paid on the principal only <br />and NOT on any accumulated interest<br />
  3. 3. IMPLE INTEREST FORMULA<br />Annual interest rate<br />Interest paid<br />I = PRT<br />Time (in years)<br /> Principal(Amount of money invested or borrowed)<br />
  4. 4. If you invested $200.00 in an account that paid simple interest of 4%, find the interest earned after 112 years. <br /> <br />enter in formula as a decimal<br />I = PRT<br />I = (200)(0.04)(1.5)<br />I = $12 <br />
  5. 5. Solving for Time<br />If you invested $300.00 in an account that paid simple interest, find how long you’d need to leave it in at 4% interest to make $15.00.<br />enter in formula as a decimal<br />I = PRT<br />15 = (300)(0.04)T<br />1.25 yrs = T<br />
  6. 6. Maturity Value<br />The Value of an asset at a specific date<br />
  7. 7. Variables for Maturity Value<br />MV<br />FV<br />A<br />S<br />Future Value<br />Amount<br />
  8. 8. Calculating Maturity Value<br />S = Principal + Interest<br />S= P + I<br />
  9. 9. Example<br />If you invested $200.00 in an account that paid simple interest of 4%, find the maturity value after 112 years. <br /> <br />S = Principal + Interest<br />S = P + I<br />S = P + PRT<br />S = 200 + (200)(.04)(1.5)<br />S = 200 + 12<br />S = $212<br />
  10. 10. Calculating Maturity Value<br />S = P (1+rt)<br />
  11. 11. Example<br />If you invested $200.00 in an account that paid simple interest of 4%, find the maturity value after 112 years. <br /> <br />S = P(1+rt)<br />S = 200(1+.04•1.5) <br />S = 200(1.06)<br />S = $212<br />

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