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Simple Interest Computation

The document provides information and examples about calculating simple interest using the formula I = PRT, where I is interest, P is principal, R is interest rate, and T is time. It defines the variables, shows how to convert between percentage and decimal forms of the interest rate, and provides step-by-step worked examples of calculating simple interest and solving for unknown variables using the formula.

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Ernesto S. Caseres Jr
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75 views

Simple Interest Computation

The document provides information and examples about calculating simple interest using the formula I = PRT, where I is interest, P is principal, R is interest rate, and T is time. It defines the variables, shows how to convert between percentage and decimal forms of the interest rate, and provides step-by-step worked examples of calculating simple interest and solving for unknown variables using the formula.

Uploaded by

Ernesto S. Caseres Jr
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Simple Interest

Formula
I = PRT
I = PRT
• I = interest earned (amount of money the
bank pays you)
• P = Principle amount invested or
borrowed.
• R = Interest Rate usually given as a
percent (must changed to decimal before
plugging it into formula)
• T = Time (must be measured in years) or
converted to years by dividing by 12 months
Converting
• Change % to decimal • Answers

1) 12% 1) .12 Move 2 places


2) 5% 2) .05 to left & drop % sign
3) 2½% 3) .025
4) 8.5% 4) .085

• Change from decimal to %


5) .098 5) 9.8%
6) .455 6) 45.5%

Move 2 places
to right & add % sign
I = PRT
Solve for one of variables:
• Solving for I • Solving for other
• Plug in numbers variables
for P, R, & T. • Plug in what you
• Then multiply know.
• Multiply the
numbers that are
on same side then
divide by that
answer.
1. A savings account is set up so that the simple interest earned on the
investment is moved into a separate account at the end of each year. If
an investment of $5,000 is invested at 4.5%, what is the total simple
interest accumulated in the checking account after 2 years.

• I = PRT • Interest paid by bank


• I= (5,000)(.045)(2) is unknown
• I=$450 • Principle (invested)
• Rate changed to
decimal
• Time is 2 years
• Multiply
2. A savings account is set up so that the simple interest earned on the
investment is moved into a separate account at the end of each year. If
an investment of $7,000 is invested at 7.5%, what is the total simple
interest accumulated in the checking account after 3 years.

• I = PRT • Interest paid by bank


• I= (7,000)(.075)(3) is unknown
• I=$1575 • Principle (invested)
• Rate changed to
decimal
• Time is 3 years
• Multiply
3. When invested at an annual interest rate of 6% an account
earned $180.00 of simple interest in one year. How much
money was originally invested in account?

• I = PRT • Interest paid by


• 180= P (.06) (1) bank
• 180 = .06P • Principle (invested)
.06 .06 is unknown
3,000 = P • Rate changed to
decimal
• Time is 1 year
• Multiply
• Divide
4. When invested at an annual interest rate of 7% an account
earned $581.00 of simple interest in one year. How much
money was originally invested in account?

• I = PRT • Interest paid by


• 581= P (.07) (1) bank
• 581 = .07P • Principle (invested)
.07 .07 is unknown
$8,300 =P • Rate changed to
decimal
• Time is 1 year
• Multiply
• Divide
5. A savings account is set up so that the simple interest earned on
the investment is moved into a separate account at the end of each
year. If an investment of $7,000 accumulate $910 of interest in the
account after 2 years, what was the annual simple interest rate on
the savings account?

• I = PRT • Interest paid by bank


• 910=(7,000)(R)(2) • Principle (invested)
• 910 = (7,000)(2)R • Rate is unknown
• 910 = 14,000 R • Time is 2 years
14,000 14,000 • Regroup & Multiply
0.065 = R • Divide
6.5% = R • Change to %
6. A savings account is set up so that the simple interest earned on
the investment is moved into a separate account at the end of each
year. If an investment of $2,000 accumulate $360 of interest in the
account after 4 years, what was the annual simple interest rate on
the savings account?

• I = PRT • Interest paid by bank


• 360=(2,000)(R)(4) • Principle (invested)
• 360 = (2,000)(4)R • Rate is unknown
• 360 = 8,000 R • Time is 4 years
8,000 8,000 • Regroup & Multiply
0.045 = R • Divide
4.5% = R • Change to %
7. Sylvia bought a 6-month $1900 certificate of deposit. At the end
of 6 months, she received a $209 simple interest. What rate of
interest did the certificate pay?

• I=PRT • Interest paid by


209= 1900(R) (6/12) bank
209=(1900)(6/12)R • Principle (invested)
209=950R • Rate is unknown
950 950 • Time is 6 months
0.22 = R (divide by 12)
22% = R • Regroup & Multiply
• Divide
• Change to %
8. I earned $75 of interest over 5 years with a rate of 3%.
How much money did I initially deposit?

•I=PRT • Interest paid by


bank - $75
• 75= (X) (.03) (5)
• Principle (invested)
75=0.15X unknown
• Rate is .03
X = $500
• Time is 5 years

$500 will be initially deposited.

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