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Transcript
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
