Example
Example
Solution:
Example:
Solution :
Example:
3. Kim got a loan of $4700 to buy a used car. The interest rate
is 7.5%. She paid $1057.50 in interest. How many years did it
take her to pay off her loan?
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How to solve interest problems using the simple interest
formula?
Interest represents a change in money.
If you have a savings account, the interest will increase your
balance based upon the interest rate paid by the bank.
If you have a loan, the interest will increase the amount you
owe based upon the interest rate charged by the bank.
Example:
1. If you invest $3,500 in savings account that pays 4% simple
interest, how much interest will you earn after 3 years? What ill
the new balance be?
2. You borrow $6000 from a loan shark. If you will owe $7200
in 18 months, what would be the simple interest rate?
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How to use the formula for simple interest to find the principal,
the rate or the time?
Examples:
1. An investment earned $11.25 interest after 9 months. The
rate was 5%. What was the principal?
3. A loan of $1200 had $36 in interest. The rate was 6%. What
was the length of the loan?
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How to solve simple interest problems, compound interest
problems, continuously compounded interest problems, and
determining the effective rate of return?
Examples of Simple Interest problems
1. Joseph buys a new home using an interest only loan where
he pays only the interest on the value of the home each month.
The home is valued at $200,000 and Joesph pays 5% interest
per year on the home. How much is his monthly interest
payment?
Solution:
= $ 240
Simple Interest for 1 year = $ 240.
= $ 480
= $ 720
= 3000 + 240
= $ 3240
= 3000 + 480
= $ 3480
Solution:
= 6000 - 5400
= 600
Solution:
= 8400 - 700
= 7700
Solution:
= (10000 x 6 x 4)/100
= $ 2400
Amount (A) = Principal (P) + Interest (I)
= 10000 + 2400
= $ 12400