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Simple Interest - PowerPoint Presentation

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Simple Interest - PPT Presentation

10 Mathematics 2015 Simple Interest You need to be able to use the simple interest formula to find INTEREST PRINCIPAL INTEREST RATE per annum TIME years You also need to be able to convert time not given in years ID: 363168

simple interest years annum interest simple annum years formula 000 amount invested borrowed rate time year paid money find charged period means

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Slide1

Simple Interest

10 Mathematics 2015Slide2

Simple Interest

You need to be able to use the simple interest formula to find

INTEREST ($)

PRINCIPAL ($)

INTEREST RATE (% per annum)

TIME (years)

You also need to be able to convert time not given in years (

ie

. months, days, weeks) to a fraction of a year, and use this to find the 4 variables aboveSlide3

Simple Interest - What is it?

If you borrow money, you must pay for the use of that money. If you lend money, you will be paid for doing so. The price of borrowing or lending money is called

interest

. The simplest type of interest is called

simple interest

.

Suppose that we borrow $500 from a friend, and agree to pay him 10% interest for one year, after which time both the amount borrowed and the interest will be repaid. What does this mean? It means we will pay our friend $500, plus 10% of the amount borrowed, or

at

the end of the

year

a total of $550.

If

the money is borrowed or invested for several years, then interest may be paid or charged

more

than once. For example, if interest of 10% is charged

per annum

, then 10% of the amount borrowed is charged each year until the loan is repaid. Slide4

Simple Interest

calculating interest (I)

Simple Interest Formula

To calculate

simple interest (I)

, we need to know

the

amount

invested or borrowed (P)

, the

interest rate

% (r) and the length of time (t) for which the money is invested or borrowed.

Example:

What is the simple interest paid on $

2000 invested at 6% per annum for four

years?

P = $2000

r = 6 % per annum

(this means 6% a year is paid in interest)

t = 4 years

(this needs to be in years or a fraction of a year)

I = ?Slide5

What is the simple interest paid on $

2000 invested at 6% per annum for four

years?

P = $2000

r = 6 % per annum

t = 4 years

I = ?

Simple Interest Formula

Simple Interest paid on the investment was $480Slide6

Simple Interest

calculating the principal (P)

Simple Interest Formula used to find principal (P)

Sometimes you want to know the amount that has been borrowed or invested (P). This means we need to rearrange our formula to make P the subject. See the equation on the side.

Example:

Over a period of five years an investment earned $1070.25 at a simple interest rate of 5.45% per annum. What was the original amount deposited?

P = ?

r = 5.4% per annum

t = 5

I = $1070.25Slide7

Example:

Over a period of five years an investment earned $1070.25 at a simple interest rate of 5.45% per annum. What was the original amount deposited?

P = ?

r = 5.4% per annum

t = 5

I = $1070.25

The original amount deposited was $3 963.89

Simple Interest Formula used to find principal (P)Slide8

Simple Interest

calculating the interest rate (r)

Simple Interest Formula used to find rate (r)

Sometimes you want to know the amount that has been borrowed or invested (P). This means we need to rearrange our formula to make P the subject. See the equation on the side.

Example:

To buy his first car, Gary took out a personal loan for $3500. He paid it back over a period of

two

years and this cost him $1085 in interest. At what simple interest rate was he charged?

P = $3500

r = ?

t = 2 years

I = $1085Slide9

Example:

To buy his first car, Gary took out a personal loan for $3500. He paid it back over a period of two years and this cost him $1085 in interest. At what simple interest rate was he charged?

P = $3500

r = ?

t = 2 years

I = $

1085

The simple interest rate Gary borrowed at was 15.5%

Simple Interest Formula used to find rate (r)Slide10

Simple Interest

calculating the time invested (t)

Simple Interest Formula used to find time (t)

Sometimes you want to know the amount that has been borrowed or invested (P). This means we need to rearrange our formula to make P the subject. See the equation on the side.

Example:

If John invests $20 000 at 10% per annum until he has $32 000, for how many years will he have to invest the money?

P = $20 000

r = 10% per annum

t = ?

I = ($32 000 - $20 000) =

$12 000Slide11

Example:

If John invests $20 000 at 10% per annum until he has $32 000, for how many years will he have to invest the money?

P = $20 000

r = 10% per annum

t = ?

I = ($32 000 - $20 000) =

$12 000

John would have to invest for 6 years

Simple Interest Formula used to find time (t)Slide12

Simple Interest – more complicated

Sometimes within simple interest questions you might be

given a time period that is not a year, before finding simple interest you need to convert this time into a fraction of a year.

Example:

What is the simple interest on $

10 000 invested at 6% per annum for eight months

P =

$10 000

r = 6 % per annum

t = of a year

I = ?