Interest is the amount of money paid or earned for the use of money.
An interest rate is the cost stated as a percent of the amount borrowed per period of time, usually one year.
For a savings account, interest is earned.
For a credit card, interest is paid.
It is earned by money P (called the principal) at an annual interest rate r for t years is given by:
I = PTR/100
Where I = Interest, P = Principal, T = Time and R = Rate or interest.
Example:
P = $6,500, T = 5years and R = 2%, Find interest. Solution: Formula, I = PTR/100
Substitute the given values in the above formula.
I = (6500 * 5 * 2) / 100
I = 65000 / 100
I = $650
Example:
You deposit $650 at a rate of 8% per year. How much simple interest will you earn after one half of the a year?
Simple Interest = PTR/100
= (650 x 8 x 1/2 ) /100
= 26
Answer: After one half of a year you will have $26 of simple interest.
Directions: Solve the following problems. Also write at least ten examples of your own involving real life situations.