SIMPLE
INTERE
ST
OBJECTIVES
Solving problems involving simple
interest.
INTRODUCTIO
N TO INTEREST
Financial institutions
pay interest to
customers who
deposit money, and
they also charge
interest to customers
who borrow money.
INTRODUCTION TO
INTEREST
There are
two types of
interest
rates:
Simple Compound
interest interest
SIMPLE INTEREST
FORMULA
Simple Interest = Principal x Rate x Time
100
Principal- The sum of money borrowed or
invested.
Rate- rate of interest per year as a
percentage.
Time- Time in years
Calculate the interest to be paid on a loan of
$10,000.00 for 8 years, at a simple interest
rate of 10% per annum. Hence calculate the
total amount to be repaid.
WORKED Simple Interest = Principal x Rate x Time
EXAMPLE 100
P = $10,000.00 R = 10 % T
= 8 years
Interest = 10,000 x 10 x 8
100
WORKED =$8,000.00
EXAMPLE The total to be repaid = $10,000 + $8,000 =
$18,000
SIMPLE INTEREST-
MANIPULATION OF FORMULA
Principal = Simple Interest x 100
RxT
Rate = Simple Interest x 100
PxT
Time = Simple Interest x 100
PxR
The simple interest on an investment of
$100,000 for 2 years amounted to $5,000.
What was the rate of interest paid?
Simple Interest = Principal x Rate x Time
100
Rate = Simple Interest x 100
WORKED PxT
EXAMPLE Simple Interest = $5000.00
Principal = $100,000.00
Time = 2 years
Rate = 5000 x 100
100,000 x 2
WORKED
EXAMPLE
Rate = 2.5 years
RECAP QUESTIONS
1. What is the formula for simple interest.
2. When would you have to pay interest to a financial institution?
3. What is time measured in for simple interest calculations?