Math Sec 6 Guided Notes Simple Interest

Sec. 6.7 Guided Notes - Simple Interest When you keep money in a savings account or borrow money, your money earns interest. Interest is an amount that is collected or paid for the use of money. One type of interest, called simple interest, is money paid only on the principal. The   principal is the amount of money deposited or borrowed. To solve problems involving simple interest, you can use the following formula.   I = Prt Interest = Principal x Rate x Time Using the Simple Interest Rate Formula Find the missing value. I = Prt, r = 8%, t = 3 years I = 575(.08)(3) I = 138 (interest only) I = Prt, r = 5%, t = 18 months I = 1200(.05)(1.5) I = 90 18/12 = 3/2 I = 600, P = 2000, r = 10%, t = 3 years 600 = 2000(r)(3) 600 = 6000r r = 10% I = 640, P = ?, r = 4%, t = 8 years 640 = P(.04)(8) 640 = .32P P = 2000 I = 18, P = 150, r = ?, t = 2 years 18 = 150(r)(2) 18 = 300r r = 6% I = 120, P = 600, r = 5%, t = ? years 120 = 600(.05)t 120 = 30t t = 4 years **Problem 1:** > Jerry deposits $6,000 in an account that earns 4% simple interest. How long will it take for his balance to reach $6,800? I = Prt 800 = 6000(0.04)t 800 = 240t t = 3.3 years **Problem 2:** > Linda deposits $10,000 in an account that earns 8% simple interest. How long will it take for the total amount in her account to reach $12,000?   I = Prt 2000 = 10000(0.08)t 2000 = 800t t = 2.5 years **Problem 3:** > Scott deposits $8,000 in an account that earns 6% simple interest. How long will it be before the total amount is $10,000? I = Prt 2000 = 8000(0.06)t 2000 = 480t t = 4.2 years **Problem 4:** > Olive Branch invests $1500 in a bank that offers her an interest rate of 4% per year. Calculate the interest that she earns at the end of a) 3 years and b) seven months. Figure out a) and b) separately. **a) 3 years:** I = Prt I = 1500(0.04)(3) I = $180 **b) 7 months:** I = Prt I = 1500(0.04)(7/12) I = $35 **Problem 5:** > After 2 years, a savings account earning simple interest held $585.75. The original deposit was $550. What was the interest rate?   I = Prt 35.75 = 550(r)(2) 35.75 = 1100r r = 3.25% HW: Simple Interest Rate Name: Date: For an account that earns simple annual interest, find the Interest and the balance of the account. Round your answer to the nearest cent, if necessary.   1. P = $525, r = 6%, t = 9 years 2. P = $1100, r = 2%, t = 15 years 3. P = $400, r = 4%, t = 12 years 4. P = $1050, r = 3.1%, t = 27 months Find the unknown quantity for an account that earns simple annual interest. 5. A = $875, P = $500, r = _____, t = 30 years 6. A = $1128.50, P = $925, r = 5.5%, t = _____ 7. A = $1213.60, P = $800, r = 4.7%, t = _____ 8. A = $672, P = $600, r = _____, t = 6 years 9. A $700 bond earns 3.5% simple annual interest. What is the interest earned after 21 years? 10. Kendall loans Reagan $500 and charges her 2% simple annual interest. Reagan promises to repay Kendall in 14 months. About how much will Reagan have to pay Kendall? Round your answer to the nearest cent.   10. The table shows three accounts that earn simple annual interest. Complete the table by finding the unknown quantity. Show all work Balance Principal Interest rate Time Amount Interest Α. $1286.25 7.5% 3 years $236.25 B. $2610.85 $2020 9% C. $3742.50 $3000 45 months Show work for A, B, C below: A) B) C) 11. You deposit $4,500 in an account that earns 6% simple interest. How much will be in you account after 5 years? 12.A deposit of $10,000 ws made to an account the year you were born. After 12 years, the account is worth $16,600. What simple interest rate did the account earn? 13. A certain bond pays simple interst directly to the investor every 6 months. An investor purchases this bond for $6500 at a 3.5% annual interest rate. What is the total amount paid after 6 months? 18 months? 30 months? 14. Jack deposited an amount of money in a savings account that earned 6.3% simple interest. After 20 years, she had earned $5,992 in interest. What was his initial deposit?