Download simple interest - percents review

Simple Interest (Percents Review)
Objectives:
…to solve rate problems involving simple interest
...to solve basic problems involving percents
Assessment Anchor:
8.A.2.2 – Represent or solve problems using rates, ratios, proportions
and/or percents.
8.A.3.2 – Use estimation strategies in problem-solving situations.
Vocabulary alert!!
INTEREST – a fee (extra amount of money) paid by the
person or entity who is borrowing money
My dad once told me that “interest” is what allows people to get things that they
otherwise wouldn’t be able to get. When I asked him one day why he was paying
so much extra money for something, he said, “Because I want it…and that’s the
only way I can have it.”
People agree to pay “interest” on many things. Car loans, home mortgages, credit
cards…they all have “interest” attached to them. Think about all the commercials
and billboards you see that mention “interest”…
Banks provide things like checking accounts, savings accounts, certificates of
deposits, etc…almost all of those things allow you to earn “interest” (the banks pay
YOU the extra money!) while they keep your money for you.
Most of the time, interest is compounded in some way…but it’s very important to
first discuss SIMPLE INTEREST so we have a good foundation to build on.
Simple Interest Formula:
I = Prt
I = interest, P = principal amount, r = interest rate, and t = time (in years)
Simple Interest (Percents Review)
EXAMPLES
1)
Michelle invests $5,000 in a
mutual fund with an annual
interest rate of 4.8%. How
much interest would she earn
after 2 years?
2)
James puts $2,300 in a savings
account earning simple interest
at 3.25% annually. How much
interest would he earn after 5
years?
% to decimal
I = Prt
I = (5,000)(0.048)(2)
I = 480
$480
3)
(Formula)
(Substitute)
(Answer)
(Label)
Larry borrows $3,000 at an
annual simple interest rate
of 9%. He is going to pay
off the loan in 18 months.
How much total interest
will he have to pay?
4)
Brooke invests $800 in a CD
that pays 8.5% simple interest
annually. How much interest
will she earn after 6 months?
% to decimal
I = Prt
I = (3,000)(0.09)(1.5)
I = 405
time in years
$405
5)
(Formula)
(Substitute)
(Answer)
(Label)
Helen invested in a savings
bond that pays simple interest
annually at 3.9%. After 5
years she earned $300 in interest.
What was her initial investment?
% to decimal
I = Prt
300 = P(0.039)(5)
300 = P(0.195)
0.195 0.195
1,538.46 = P
solve for “P”
$1,538.46
6)
Gene paid $62,700 just in
interest on his student loan he
took out 20 years earlier. The
interest rate on his loan was
8.25%. What was the amount
of Gene’s initial loan?
Simple Interest (Percents Review)
7)
Paul invested $8,500 in a
simple interest savings
account. After just 3 years,
he had earned $1,912.50 in
interest. What is the interest
rate on Paul’s account?
8)
Linda borrowed $1,500 for a
vacation trip. The loan is for
20 months, and will cost Linda
an extra $125 in interest. What
interest rate did Linda’s loan
carry?
10)
Luis deposits $12,000 in an
account that earns 2.5% simple
interest annually. How many
months until his account has
reached a total of $12,450?
I = Prt
1,912.50 = (8,500)r(3)
1,912.50 = r(25,500)
25,500
25,500
0.075 = r
9)
solve for “r”
7.5%
Ken puts $2,000 in an account.
The account was earning 6%
simple interest annually.
Years later, he sees that the
account is now at $2,840.
How many years have passed?
I = Prt
840 = (2,000)(0.06)t
840 = 120t
120 120
7=t
solve for “t”
7 years
“Now would probably be a good time to review other
things involving money and percents…like discounts,
tax, etc. Do you remember some of the
generic equations that helped us?”