Basic Simple interest
15 likes5,019 views
The document explains the formula for calculating simple interest (I=PRT) and provides examples of its use. It defines the terms in the interest formula: I = interest, P = principal/starting amount, R = interest rate, T = time. It explains how to express T as a fraction of a year depending on the interest payment frequency. Examples are provided to calculate total repayment amount, time to earn a target interest, interest rate needed, and determining the original principal from the interest charged.
Basic Simple interest
- 1. Image Purchased by Passy World from Dreamstime.com
- 2. I=PxRxT Where: I = the Interest Money created in dollars P = the “Principal” starting amount of money R = the Interest Rate per year (in decimal form) T = the Time the money is Invested, or Borrowed, in Years
- 3. Interest can be calculated to be paid as Half-Yearly, Quarterly, Monthly, or Daily. "T" needs to be entered as a fraction of a year, into I = PRT, because the Interest Rate is in units of years. Half Yearly : T = 1/2 Quarterly : T = 1/4 Monthly : T = 1/12 Daily : T = 1/365
- 4. Roxanna borrows $6000 to buy a car at 18.5% pa Simple Interest, to be paid back over 5 years. I = PRT I = $6 000 x 0.185 x 5 I = $5 550 Image Purchased by Passy World from Dreamstime.com
- 5. Roxanna borrows $6000 to buy a car at 18.5% pa Simple Interest, to be paid back over 5 years. The Total Amount Roxanna has to repay is the original $6000, plus all of the $5550 Interest. Total Amount = Principal + Interest = $6000 + $5550 = $11 550
- 6. “How long does Keith need to invest $4000, at 3.33% pa, to earn $800 of Interest money?" I = PRT rearranges to T=I (P x R) T = 800 (4000 x 0.0333) T = 6.006 T = 6 years Image Source: http://www.thelocalloancompany.com.au
- 7. “What Interest Rate do we require, to get $10 000 of interest money generated from investing $20 000 for 3 years ?" I = PRT rearranges to R=I (PxT) R = 10 000 (20 000 x 3) R = 0.166666 R = 16.7% Image Source: http://sklepcukrzyka.pl
- 8. “Tayla borrowed money on 22% Simple Interest for 1 year to buy some expensive Christmas Presents. When she paid back the Loan a year later, $440 Interest was charged. What was the original Principal Amount she borrowed?" I = PRT rearranges to P=I (R x T) P = 440 (0.22 x 1) P = $2000 Image Source: http://static.guim.co.uk
- 9. http://passyworldofmathematics.com/ All slides are exclusive Copyright of Passy’s World of Mathematics Visit our site for Free Mathematics PowerPoints