Chapter 12 Lesson 3

Simple InterestPages 331-3321-3 all

Cornell Notes – Chap. 12 Lesson 3

Main Ideas/Cues:Interest

Principal

Annual interest rate

Balance

Details:The amount earned or paid for

the use of money.

An amount of money that is deposited or borrowed.

The percent of the principal earned or paid per year.

The sum of the interest and the principal.

Cornell Notes – Chap. 12 Lesson 3

Main Ideas/Cues:Simple Interest

Details:Interest that is earned or

paid only on the principal. The simple interest I is the product of the principal P, the annual interest rate r written as a decimal, and the time t in years. I = Prt

Problem #1

First Step: Write the Problem

1. Miguel deposited $500 into an account that earns 6% simple annual interest. What will his account balance be after 2 years?

Problem #1

Second Step: Rewrite the problem using the Simple Interest formula.

1. $500 deposited with a 6% simple annual interest, balance after 2 years?

I = Prt I = 500 • 0.06 • 2

Simple Interest formula

Replace variables with given amounts

Problem #1

Third Step: Multiply.

1. I = 500 • 0.06 • 2

I = 60Interest

Problem #1

Fourth Step: Add the Interest to the principal.

1. 500 + 60

Account Balance = $560Answer

Problem #2

First Step: Write the Problem

2. You buy a savings bond worth $300. After 4 months, the bond is worth $305. Find the simple annual interest rate.

Problem #2

Second Step: Rewrite the problem using the Simple Interest formula.

2. $300 savings bond what is the simple annual interest, if the balance after 4 months is $305?

I = Prt305 – 300 = 5

5 = 300 • r • 4 months 5 = 300 • r • 1/3

Simple Interest formula

Replace variables with given amounts

Rewrite months as part of a year (in simplest form)

Subtract original amount from balance after 4 months to find I

Problem #2

Third Step: Multiply.

2. 5 = 300 • r • 1/3

5 = 100 • r New Problem

Problem #2

Fourth Step: Isolate the variable by performing the inverse operation (division)

2. 5 = 100 • r

Simple annual interest rate = 5%Answer

Problem #3

First Step: Write the Problem

3. Tricia put $750 into a certificate of deposit. Her simple annual interest rate is 5%. She receives a check for the interest at the end of each year. How long will it take Tricia to earn $150 in interest?

Problem #3

Second Step: Rewrite the problem using the Simple Interest formula.

3. $750 certificate of deposit, simple annual interest rate is 5%, how long will it take it earn $150 in interest?

I = Prt 150 = 750 • 0.05 • t

Simple Interest formula

Replace variables with given amounts

Problem #3

Third Step: Multiply.

3. 150 = 750 • 0.05 • t

150 = 37.50 • t New Problem

Problem #3

Fourth Step: Isolate the variable by performing the inverse operation (division)

3. 150 = 37.50 • t

time = 4 yearsAnswer

Cornell Notes Summary

Include the following questions and answers in your Cornell Notes Summary.

What does each variable in the formula I = Prt represent?