Calculating Simple Interest and Maturity Value

1. SIMPLE INTEREST Since this section involves what can happen to your money, it should be of INTEREST to you!

2. IMPLE INTEREST DEFINITION Interest paid on the principal only and NOT on any accumulated interest

3. IMPLE INTEREST FORMULA Annual interest rate Interest paid I = PRT Time (in years) Principal(Amount of money invested or borrowed)

4. If you invested $200.00 in an account that paid simple interest of 4%, find the interest earned after 112 years. enter in formula as a decimal I = PRT I = (200)(0.04)(1.5) I = $12

5. Solving for Time If you invested $300.00 in an account that paid simple interest, find how long you’d need to leave it in at 2% interest to make $15.00. enter in formula as a decimal I = PRT 15 = (300)(0.04)T 1.25 yrs = T

6. Maturity Value The Value of an asset at a specific date

7. Variables for Maturity Value MV FV A S Future Value Amount

8. Calculating Maturity Value S = Principal + Interest S= P + I

9. Example If you invested $200.00 in an account that paid simple interest of 4%, find the maturity value after 112 years. S = Principal + Interest S = P + I S = P + PRT S = 200 + (200)(.04)(1.5) S = 200 + 12 S = $212

10. Calculating Maturity Value S = P (1+rt)

11. Example If you invested $200.00 in an account that paid simple interest of 4%, find the maturity value after 112 years. S = P(1+rt) S = 200(1+.04•1.5) S = 200(1.06) S = $212