Download Chp. 1.1 Simple Interest

Math621A_Chp1_1_SimpleInterest_W2016_wNotes.notebook
May 30, 2016
Chp. 1.1 Simple Interest
Definitions:
Term (T): The contracted duration of an investment or loan.
Principal (P): The original amount of money invested or loaned
Future Value (A): The amount A, that an investment will be worth
after a specified period of time.
Simple Interest
A = P + Prt or
A = P ( 1+ rt )
Interest (I): The amount of money earned on an investment or paid on a
loan
I = interest (dollars)
I = Prt
I = A - P
P = principal (dollars)
r = interest rate (decimal %)
t = time ( usually in years)
Fixed Interest Rate (r): An interest rate that is guaranteed
not to change during the term of an investment or loan.
r =
I
Pt
Rate of Return (Rr): a ratio of interest earned (or lost) on an
investment to the amount invested. Usually expressed as a decimal or
percentage
Rr =
I
P
Based on the graph shown determine the;
a) term
b) Principal
c) Interest
d) Fixed Interest rate
1
Math621A_Chp1_1_SimpleInterest_W2016_wNotes.notebook
May 30, 2016
The value of an investment that earns simple interest over time is a linear function.
The accumulated interest is also a linear function.
2
Math621A_Chp1_1_SimpleInterest_W2016_wNotes.notebook
May 30, 2016
3