simple interest
DESCRIPTION
Calculating Simple Interest and Maturity ValueTRANSCRIPT
SIMPLE
INTEREST
Since this section involves what can happen to your money, it should be of INTEREST to you!
IMPLE INTEREST DEFINITION
Interest paid on the principal only
and NOT on any accumulated interest
Annual interest rate
IMPLE INTEREST FORMULA
Interest paid
Principal(Amount of money invested or borrowed)
Time (in years)I = PRT
If you invested $200.00 in an account that paid simple interest of 4%, find the interest earned after 1 years.
I = (200)(0.04)(1.5)
I = $12
enter in formula as a decimal I = PRT
If you invested $300.00 in an account that paid simple interest, find how long you’d need to leave it in at 2% interest to make $15.00.
15 = (300)(0.04)T
1.25 yrs = T
Solving for Time
enter in formula as a decimal I = PRT
The Value of an asset at a specific date
Maturity Value
MV
FV
A
S
Variables for Maturity Value
Future Value
Amount
S = Principal + Interest
S= P + I
Calculating Maturity Value
If you invested $200.00 in an account that paid simple interest of 4%, find the maturity value after 1 years.
S = Principal + Interest
S = P + I
S = P + PRT
S = 200 + (200)(.04)(1.5)
S = 200 + 12
S = $212
Example
S = P (1+rt)
Calculating Maturity Value
If you invested $200.00 in an account that paid simple interest of 4%, find the maturity value after 1 years.
S = P(1+rt)
S = 200(1+.04•1.5)
S = 200(1.06)
S = $212
Example