Simple Interest
Write the rule for simple interest
I = P x R x T divided by 100
How much will a deposit of $4500 at 7% compounded annually be after 9 years?
$8273.06
Find the simple interest on a loan of $5000 at 9% p.a. for 4 years. No marks unless full working out!
I = PRT/100
I = 5000 x 9 x 4/100
I = $1800
In the compound interest formula what does A stand for?
A = Amount - future value of the investment
How much will a deposit of $500 at 11.5% compounded annually be after 2 years?
$621.61
Find the simple interest on a loan of $4000 at 7.5% p.a. for 3 years. No marks unless full working out!
I = PRT/100
I = 4000 x 7.5 x 3/100
I = $900
What does the word Principal mean in regard to interest
Principal refers to the amount borrowed or the amount invested
William has $14, 000 to invest. He invests the money at 9% p.a. for 5 years with interest compounded annually. Must have full working out!
A = P x (1+R)n
A = $14000 x (1 + 0.09)5
= $21 540.74
Find the simple interest on a loan of $6000 at 6% p.a. for 6 years. What is the final amount?
No marks unless full working out!
I = PRT/100
I = 6000 x 6 x 6/100
I = $2160
Final amount = $6000 + $2160 = $8160
What is the compound interest formula?
A = P x (1 + r) t
Ben has $20000 to invest over the next 3 years. He has the choice of investing his money at 6.25% p.a. simple interest OR 6% p.a. compound interest. Calculate which is the best option for Ben.
Simple interest earned = $3750 = $23750
compound interest earned = $23820.32
Compound interest is the better option
The ticketed price of a mobile phone is $600. Lucy decides to purchase the phone using her credit card. After 1 month the credit card company charges interest at a rate of 15% p.a. Calculate the amount of interest that Lucy must pay on her credit card after 1 month.
CLUE: How many months is the question referring to? How many months in a year? (This one is tricky!)
I = PRT/100
I = 600 x 15 x 1 divided 100 x 12
I = $7.50
You were given $15 000 to invest by your father for a period of 1 year. Which of the 2 options is better?
8.2% compounding annually OR 7.8% simple interest
Compound Interest = $273000
Simple Interest= $16170
Compound interest is the better option because I have earned an extra $12, 300 in a year.