Simple Interest

Formula
I = PRT
 I = PRT
• I = interest earned
• P = Principal 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
• I= (5,000)(.045)(2) • Principal (invested)
• I=450 • Rate changed to
decimal
• Time is 2 years
• Multiply
2. 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
• 180= P (.06) (1) • Principal (invested)
• 180 = .06P is unknown
.06 .06 • Rate changed to
3,000 = P decimal
• Time is 1 year
• Multiply
• Divide
3. 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 Principal

• 910=(7,000)(R)(2) (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 %
 Activity
1. Judy paid 108 in 2. Sam wants to
interest on a loan borrow 1,500 for 15
that she had for 6 months and will have
months. The to pay 225 in
interest rate was interest. What is the
12%. How much rate he is being
was the charged?
principal?
3. Shelby 4. Find the interest
borrowed earned on a 3-year
10,000 at 8% investment of 5,000
and paid 1,600 at 4.5% interest.
in interest.
What was the
length of the
loan?
 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 is invested at 7.5%, what
is the total simple interest
accumulated in the checking
account after 3 years.
 6. 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?
 Maturity value
of a loan.
• Maturity value: the total amount of
money due by the end of a loan period;
the amount of the loan and interest.
• If the principal and the interest are
known, add them.
• MV = principal + PRT
• MV = P(1+RT)
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 Example
• Marcus Logan can purchase furniture on a
2-year simple interest loan at 9% interest
per year.
• What is the maturity value for a 2,500
loan?
• MV = P (1 + RT) Substitute known
values.
• MV = 2,500 ( 1 + 0.09 x 2)

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• MV = 2,500 ( 1 + 0.09 x 2)
• MV = 2,500 (1 + 0.18)
• MV = 2,500 (1.18)
• MV = 2,950
• Marcus will pay 2,950 at the end of two
years.

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 Activity
• Terry Williams is going to borrow 4,000 at
7.5% interest. What is the maturity value
of the loan after three years?
• $4,900
• Jim Sherman will invest 3,000 at 8% for 5
years. What is the maturity value of the
investment?
• $4,200

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 Time Between Two Dates
Actual Time :

16
 Find ordinary and
exact time.
• Ordinary time: time that is based on
counting 30 days in each month.

• Exact time: time that is based on

counting the exact number of days in a
time period.

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 Examples
• The ordinary time from July 12 to
September 12 is 60 days.
• To find the exact time from July 12 to
September 12, add the following:
Days in July (31 -12 =) 19
Days in August 31
Days in September +12
62 days
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