Simple Interest and Compound Interest

Simple v. Compound Interest

Compound interest is earned on the principal AND on any earned interest.

Compound Interest

Simple interest is interest that is only earned on the initial investment or amount borrowed (principal).

Simple Interest

What's the difference?

Calculating SIMPLE interest

To calculate simple interest use the formula:

I=PRT​ (interest = principal x rate x time)

This formula will calculate the amount of interest earned. To find the total after interest, add the interest to the principal.​

If you are looking for the other variables, you have to move the formula around.​

For example, when looking for the P, divide the interest by RxT​.

When looking for the T, divide the interest by PxR.​

Multiple Choice

The simple interest formula is I=Prt.  What does the t represent?

• Principle
• Interest
• Time, in hours
• Time, in years

Multiple Choice

I = Prt where r represents the rate.  Rates must be converted into ____ before multiplying.

• fractions
• mixed numbers
• decimals
• integers

Multiple Choice

What does the "I" in the interest formula stand for?

• Important
• Interest
• Internet
• Igloo

Multiple Choice

What does the "r" in the interest formula stand for?

• Principal
• Interest
• rate
• time

Multiple Choice

Principal = $500
Interest rate =5%
Time = 5 years
What is the interest earned?

• 95
• 105
• 125
• 135

Multiple Choice

Emilio borrows $1200 from a bank with 8% simple interest per year.  How much will he have to pay back total in 2 years?

• $150
• $192
• $1350
• $1392

This formula will calculate the total amount after interest.

If interest is compounded annually, n=1. If it is monthly, n=12. ​If it is quarterly, n=4.

Calculating Compound Interest

Multiple Choice

In the compound interest formula A=P(1+r)^t what does the A stand for?

• The amount of interest

• The total amount

• The interest rate

• The time

Multiple Choice

In the compound interest formula A=P(1+r)^t what does the P stand for?

• The time

• The total amount

• The principal amount (original amount)

• The interest rate

Multiple Choice

Jacob borrows $500 from Abraham and agrees to have the loan compounded annually for 5 years with an interest rate of 2.5%. How much will the total amount be that Jacob owes?

• $565.70

• $262609.38

• $65.70

• $630.20

Multiple Choice

Annually means how many times a year?

• 4

• 2

• 1

• 6

Multiple Choice

Semi-Annually means how many times a year?

• 4

• 2

• 1

• 6

Multiple Choice

Monthly means how many times a year?

• 4

• 12

• 52

• 365

Multiple Choice

the time has to be in _____________

• years

• months

• days

• seconds

Multiple Choice

Which is better to have when you invest money?

• Compound Interest

• Simple Interest

• Good interest

• Simpound Interest

Multiple Choice

Calculate the simple interest

I=prt

Principal =$250

rate= 4%

time= 3 years

• $30

• $300

• .3

Multiple Choice

Ms. Samuel wants to borrow $18,500 for 12 years at a rate of .4%

How much interest will she pay to the investor?

Calculate the simple interest I=Prt

• 700

• 800

• $888.00

Question #1

Ivan deposits $5,000 into an account that pays simple interest at a rate of 5% per year. How much interest will he be paid in the first 3 years?

Dropdown

Ivan deposits $5,000 into an account that pays simple interest at a rate of 5% per year. How much interest will he be paid in the first 3 years?

What is the principle? ​

Select answer

What is the rate? ​

Select answer

What is the time? ​

Select answer

Ivan deposits $5,000 into an account that pays simple interest at a rate of 5% per year. How much interest will he be paid in the first 3 years?

Math Response

Ivan deposits $5,000 into an account that pays simple interest at a rate of 5% per year. How much interest will he be paid in the first 3 years?

Type answer here

Correct Answer: 750

Deg^°

Rad

Question #2

Maria deposits $300 into an account that pays simple interest at a rate of 6% per year. How much interest will she be paid in the first 5 years?

Drag and Drop

Maria deposits $300 into an account that pays simple interest at a rate of 6% per year. How much interest will she be paid in the first 5 years?



$$I\ =\ P\cdot r\cdot t$$

= ​ (​

Placeholder

) x (​

Placeholder

) x (​​

Placeholder

)

Drag these tiles and drop them in the correct blank above

$300

6%

5 years

Maria deposits $300 into an account that pays simple interest at a rate of 6% per year. How much interest will she be paid in the first 5 years?

Math Response

Maria deposits $300 into an account that pays simple interest at a rate of 6% per year. How much interest will she be paid in the first 5 years?

Type answer here

Correct Answer: 90

Deg^°

Rad

Question #3

Jessica borrowed $500 from a bank for 2 years and was charged simple interest. The total interest that she paid on the loan was $70. As a percentage, what was the annual interest rate of her loan?

Match

Jessica borrowed $500 from a bank for 2 years and was charged simple interest. The total interest that she paid on the loan was $70. As a percentage, what was the annual interest rate of her loan?

Match the following

• 500

• 2

• Unknown

• 70

Principle (P)

time (t)

rate (r)

Interest (I)

• Principle (P)

• time (t)

• rate (r)

• Interest (I)

Jessica borrowed $500 from a bank for 2 years and was charged simple interest. The total interest that she paid on the loan was $70. As a percentage, what was the annual interest rate of her loan?

Math Response

Jessica borrowed $500 from a bank for 2 years and was charged simple interest. The total interest that she paid on the loan was $70. As a percentage, what was the annual interest rate of her loan?

Type answer here

Correct Answer: 7

Deg^°

Rad

Question #4

Felipe invested in a savings bond for 6 years and was paid simple interest at an annual rate of 3%. The total interest that he earned was $540. How much did he invest?

Math Response

Felipe invested in a savings bond for 6 years and was paid simple interest at an annual rate of 3%. The total interest that he earned was $540. How much did he invest?

Type answer here

Correct Answer: 3000

Deg^°

Rad

Question #5

Chris borrowed $8,000 from a lender that charged simple interest at an annual rate of 7%. When Chris paid off the loan, he paid $1,680 in interest. How long was the loan for, in years?

Math Response

Chris borrowed $8,000 from a lender that charged simple interest at an annual rate of 7%. When Chris paid off the loan, he paid $1,680 in interest. How long was the loan for, in years?

Type answer here

Correct Answer: 3

Deg^°

Rad

Question #6

To be able to go on a trip to South America, Ann decides to save for 4 years. She opens a savings account with $300. The account pays simple interest at an annual rate of 5%. She doesn't make any more deposits. What will the total amount in the account be (including interest)?

Math Response

To be able to go on a trip to South America, Ann decides to save for 4 years. She opens a savings account with $300. The account pays simple interest at an annual rate of 5%. She doesn't make any more deposits. What will the total amount in the account be (including interest)?

Type answer here

Correct Answer: 360

Deg^°

Rad

Question #7

Josh deposits $5,000 into an account that pays simple interest at an annual rate of . He does not make any more deposits. He makes no withdrawals until the end of years when he withdraws all the money. What will the total amount in the account be (including interest)?

Math Response

Josh deposits $5,000 into an account that pays simple interest at an annual rate of . He does not make any more deposits. He makes no withdrawals until the end of years when he withdraws all the money. What will the total amount in the account be (including interest)?

Type answer here

Correct Answer: 6200

Deg^°

Rad

The End

Multiple Choice

A bank is offering 2.5% simple interest on a savings account. If you deposit $5,000, how much interest will you earn in three years?

• $5375

• $375

• $37500

• $42500

Multiple Choice

Sarah borrowed $18,000 for 4 years at an annual simple interest rate of 7%. What is the total amount she will repay for the car loan?

• $50,4000

• $5,040

• $23,040

• $18,000

Multiple Choice

Ricco deposits $500 in an account that earns 2.5% interest compounded annually for 3 years. Wally deposits $500 in an account that earns 5.1% interest compounded annually for 2 years. Who will earn the greatest amount of interest?

• Ricco will earn $13.85 more than Wally

• Wally will earn $13.85 more than Ricco

Multiple Choice

Both Ryan and Tom open their accounts with an initial deposit of $3500. They are both planning a six-year investment and will withdraw their money after 6 years. Who will have a greater balance in six years? How much more will that person have?

• Tom will have $83.77 more than Ryan.

• Ryan will have $83.77 more than Tom.

• Ryan will have $3416.23 more than Tom.

• Tom will have $3416.23 more than Ryan.