Personal Finance

CHAPTER 8

Personal Finance

Copyright ? 2015, 2011, 2007 Pearson Education, Inc.

Section 8.3, Slide 1

8.3

Simple Interest

Copyright ? 2015, 2011, 2007 Pearson Education, Inc.

Section 8.3, Slide 2

Objectives

1. Calculate simple interest. 2. Use the future value formula.

Copyright ? 2015, 2011, 2007 Pearson Education, Inc.

Section 8.3, Slide 3

Simple Interest

Interest is the dollar amount that we get paid for lending money or pay for borrowing money. The amount of money that we deposit or borrow is called the principal. The amount of interest depends on the principal, the interest rate, which is given as a percent and varies from bank to bank, and the length of time for which the money is deposited. Simple interest involves interest calculated only on the principal.

Copyright ? 2015, 2011, 2007 Pearson Education, Inc.

Section 8.3, Slide 4

Simple Interest

To calculate simple interest:

Interest = principal ? rate ? time I = Prt

The rate r, is expressed as a decimal when calculating simple interest.

Copyright ? 2015, 2011, 2007 Pearson Education, Inc.

Section 8.3, Slide 5

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