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Holt CA Course 1
6-7 Simple Interest
Warm UpWarm UpCalifornia StandardsCalifornia StandardsLesson PresentationLesson Presentation
PreviewPreview
Holt CA Course 1
6-7 Simple Interest
Warm UpMultiply.
1. 800 0.04 32. 1,700 2 0.253. 900 0.05 44. 1,200 6 0.35
968501802,520
Holt CA Course 1
6-7 Simple Interest
NS1.4 Calculate given percentages of quantities and solve problems involving discounts at sales, interest earned, and tips.Also covered: AF1.1
California Standards
Holt CA Course 1
6-7 Simple Interest
Vocabularyinterestsimple interestprincipal
Holt CA Course 1
6-7 Simple InterestWhen you keep money in a savings account, your money earns interest. Interest is an amount that is collected or paid for the use of money. For example, the bank pays you interest to use your money to conduct its business. Likewise, when you borrow money from the bank, the bank collects interest on its loan to you.
Holt CA Course 1
6-7 Simple InterestOne type of interest, called simple interest, is money paid only on the principal. The principal is the amount of money deposited or borrowed. To solve problems involving simple interest, you can use the following formula.
I = P · r · t
Simple interest is money paid only on the principal
Principal is the amount borrowed or invested
Rate of interest is the percent charged or earned
Time that the money is borrowed or invested (in years)
Notice that the interest rate is expressed as a decimal and the time is expressed in years.
Holt CA Course 1
6-7 Simple Interest
Find the missing value.
Additional Example 1: Using the Simple Interest Formula
A. I = , P = $575, r = 8%, t = 3 yearsI = P · r · t
I = 575 · 0.08 · 3I = $138
The simple interest is $138.00.
Substitute. Use 0.08 for 8%.
Multiply.
Holt CA Course 1
6-7 Simple Interest
Find the missing value.Additional Example 1: Using the Simple Interest Formula
B. I = $204, P = $1,700, r = , t = 6 yearsI = P · r · t
204 = 1,700 · r · 6204 = 10,200r
20410,200
= 10,200r10,200
0.02 = rThe interest rate is 2%.
Substitute.Multiply.
Divide each side by 10,200.
Holt CA Course 1
6-7 Simple InterestAdditional Example 2: Problem Solving Application
Avery deposits $6,000 in an account that earns 4% simple interest. How long will it take for his account balance to reach $6,800?
11 Understand the ProblemRewrite the question as a statement:• Find the number of years it will take for Avery’s account to reach $6,800.List the important information:• The principal is $6,000.• The interest rate is 4%.• His account balance will be $6,800.
Holt CA Course 1
6-7 Simple Interest
22 Make a Plan
Avery’s account balance A includes the principal plus the interest: A = P + I. Once you solve for I, you can use I = P · r · t to find the time.
Additional Example 2 Continued
Holt CA Course 1
6-7 Simple Interest
Solve.33A = P + I
6,800 = 6,000 + I
800 = II = P · r · t
800 = 6,000 · 0.04 · t800 = 240t
3.33 tIt will take 3 1
3 years.
Substitute.Subtract from each side.
Substitute. Use 0.04 for 4%.Multiply.
Divide each side by 240.
Round to the nearest hundredth.
–6,000 – 6,000
800240
= 240t240
Additional Example 2 Continued
Holt CA Course 1
6-7 Simple Interest
Look Back44
After exactly 3 years, Avery’s money will have earned $800 in simple interest and his account balance will be $6,800.
13
I = 6,000 · 0.04 · 3 13 = 800
An answer of 3 years for the account to reach $6,800 makes sense.
13
Additional Example 2 Continued
Holt CA Course 1
6-7 Simple Interest
Find the missing value.
Check It Out! Example 1
A. I = $600, P = $2,000, r = , t = 3 yearsI = P · r · t
600 = 2,000 · r · 3600 = 6,000r
6006000
= 6,000r6,000
0.1 = rThe interest rate is 10%.
Substitute.Multiply.Divide each side by 6,000.
Holt CA Course 1
6-7 Simple InterestCheck It Out! Example 2
Linda deposits $10,000 in an account that earns 8% simple interest. How long will it take for the total amount in her account to reach $12,000?
11 Understand the ProblemRewrite the question as a statement:• Find the number of years it will take for Linda’s account to reach $12,000.List the important information:• The principal is $10,000.• The interest rate is 8%.• Her account balance will be $12,000.
Holt CA Course 1
6-7 Simple Interest
22 Make a Plan
Linda’s account balance A includes the principal plus the interest: A = P + I. Once you solve for I, you can use I = P · r · t to find the time.
Check It Out! Example 2 Continued
Holt CA Course 1
6-7 Simple Interest
Solve33A = P + I
12,000 = 10,000 + I
2,000 = II = P · r · t
2,000 = 10,000 · 0.08 · t2,000 = 800t
2.5 = tIt will take 2 1
2 years.
Substitute.Subtract 10,000 from each side.
Substitute. Use 0.08 for 8%.Multiply.
Divide each side by 800.
–10,000 –10,000
2,000 800
= 800t800
Check It Out! Example 2 Continued
Holt CA Course 1
6-7 Simple Interest
Look Back44
After exactly 2 years, Linda’s money will have earned $2,000 in simple interest and her account balance will be $12,000.
12
I = 10,000 · 0.08 · 2 12 = 12,000
An answer of 2 years for the account to reach $12,000 makes sense.
12
Check It Out! Example 2 Continued
Holt CA Course 1
6-7 Simple InterestLesson Quiz
Find each missing value.
1. I =
2. I = $18, P = $150, r =
3. I = $640, P =
4. I = $120, P = $600, r = 5% t =
6%$240
$2,0004 years
, P = $800, r = 10%, t = 3 years
, t = 2 years
, r = 4%, t = 8 years
5. Dennis deposits $6,000 in an account that earns 5.5% simple interest. How long will it take before the total amount is $8,000?
a little over 6 years