Y9 Intervention - Financial Maths

Y9 Intervention - Simple Interest

What is simple interest?

• For it to be worthwhile, people (or banks) who lend money make extra money on what they give.

• So, when you borrow money, you need to pay back extra.

• This extra amount is called interest.

Multiple Choice

What is interest?

• extra money paid back when you borrow money

• extra money you earn when you invest

• both of these options

What is principal?

The principal is the starting amount of either the amount you borrow or the amount you invest.

Multiple Choice

Jane wants to buy a car that cost $5000, she has a saved $500 but will need to borrow the rest. What is the principal amount Jane will need to borrow?

• $500

• $4500

• $5000

• $5500

What is an interest rate?

An interest rate is the interest (or extra amount) paid over a period of time. This is usually each year or per annum.

Interest rates are expressed as a percentage, e.g. 5% which equals 0.05 (divide by 100). Alternatively, use the % button on your calculator (yes it has a % button!).

Multiple Choice

Jack pays 11% interest on his loan. This is equal to:

• 11

• 1.1

• 0.11

• 0.011

Calculating Simple Interest

• borrow more money (P) ^interest

• higher interest rate (R) ^interest

• take longer to pay back loans/invest ^interest

I like to party!

I = PRT!

Why simple interest?

It is called simple interest because everything being multiplied is raised to the power of 1.

When you graph this, the line is straight.

Guess which one the bank uses?

Multiple Select

Kal invests $2000 which earns 4.5% p.a. over 3 years. Which is the correct calculation to work out the amount of simple interest Kal earns?

• I = 2000 x 4.5 x 3

• I = 2000 x 0.45 x 3

• I = 2000 x 0.045 x 3

• I = 2000 x 4.5 x 3 / 100

Multiple Choice

Meg borrows $1000 at 10% for 3 years. How much does Meg have to pay back in total?

• $300

• $1300

Tips:

Look for the words invest/borrow = principal.

% = rate

years/months = time

convert months to years divide by 12

Watch out for total amounts (principal + interest)!

Poll

How do you feel about calculating simple interest?

• Not bad

• Good

• Just need practice

• No idea!

Questions?

Are you stuck on something?

Next lesson: calcuations when interest is given.