Simple Interest

is money added onto the original amount saved (earned) or borrowed (charged).

Simple Interest

Simple Interest Formula

I (Interest) - The amount earned or the amount charged

p (Principal)- The amount borrowed or deposited

r (Rate) – Percent at which the interest is charged

t (Time)- In years or months

Calculating Simple Interest

Convert the percent to a decimal.

16% = .16

How much money would you pay in interest if you borrowed $1,600 for 1 ½ years at 16% APR?

I = prt

I = $1,600 x .16 x 1.5

I = $384

Shawnique bought a beautiful house for $350,000. Her loan was for 30 years at 6.5% APR. How

much money will she end up paying in interest?

6.5% = . 065

I = prt I = $350,000 x .065 x 30

I = $682,500

Kent put $8,500 into an 18 month CD. The interest rate is 3.25% How much money will Kent

earn in interest?

3.25% = . 0325

I = prt I = $8,500 x .0325 x 1.5

I = $414.38

Katie bought a new sports car for $28,500. She financed her car for 6 years at 6.75%APR. How much will she end up paying for interest on her

car?

6.75% = . 0675

I = prt I = $28,500 x .0675 x 6

I = $11,542.50

Cody bought a new truck for $25,000. He took out a loan for 5 ½ years with 7.75% APR. How

much will Cody end up paying in interest?

7.75% = . 0775

I = prt I = $25,000 x .0775 x 5.5

I = $10,656.25

Tia saved her $9,000 for 2 ½ years at 4.25% APR in a CD, to go on a month long vacation with her

family. How much did she earn in interest?

4.25% = . 0425

I = prt I = $9,000 x .0425 x 2.5

I = $956.25