LOANS VOCABULARY AND SIMPLE INTEREST

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What is the formula for calculating simple interest?

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I = P * r * t, where I is interest, P is principal, r is rate (as a decimal), and t is time (in years).

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CCSS.7.RP.A.3

Front

If you invest $1,000 at a simple interest rate of 5% for 3 years, how much interest will you earn?

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$150

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CCSS.7.RP.A.3

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What does the 'P' in the simple interest formula represent?

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P represents the principal amount, or the initial amount of money invested or borrowed.

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CCSS.7.RP.A.3

Front

What does the 'r' in the simple interest formula represent?

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r represents the annual interest rate expressed as a decimal.

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CCSS.8.EE.C.7B

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How do you convert a percentage to a decimal?

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Divide the percentage by 100. For example, 4.3% becomes 0.043.

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What is the time period in the simple interest formula?

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Time (t) is the duration for which the money is invested or borrowed, measured in years.

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CCSS.8.EE.C.7B

Front

If you have a principal of $5,000 and earn $300 in interest, what is the interest rate?

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The interest rate is 1.2%.

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CCSS.7.RP.A.3

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What is the difference between simple interest and compound interest?

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Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus any interest earned.

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CCSS.7.RP.A.3

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Why is it important to convert the interest rate to a decimal before using it in calculations?

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It ensures accurate calculations, as the formula requires the rate in decimal form.

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CCSS.7.RP.A.3

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If you save to buy a house instead of renting to own, what is a potential financial benefit?

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You may save more money in the long run by avoiding high rental costs and building equity.

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CCSS.7.RP.A.3