Lesson 3.6: Simple Interest Problems

Definitions:

Simple Interest: Interest that is applied only to the initial investment is called simple interest.

Compounding Interest: Interest that builds on itself (charges interest on the interest) is called compounding interest.

Principal: The initial amount you invest is the principal.

Interest Rate: An interest rate is a fixed rate used to calculate interest on the principal.

Interest Amount = Interest Rate X Principal X Years

​Simple interest represents a proportional relationship between the yearly interest and the principal or the initial amount. The ratio of yearly interest to principal is the interest rate.

How will we use this and what is this similar to?

●Similar to percent change problems

○Like markdowns and markups, except now we are finding out how interest will cause change

●We will use this to calculate how money “grows”

○Ever heard the expression “Money doesn’t grow on trees”, well it doesn’t it “grows” from
interest.

​Interest Amount = Interest Rate X Principal X Years

​​Interest Amount = Interest Rate X Principal X Years

• Principal = 3.3%, Interest = $26.40, Time = 4, Interest Rate = 200

Interest Amount = Interest Rate X Principal X Years

​​4: I understood this so well, I knew how to do the problems without Mr. Carbone teaching me how to do them.

3: I did pretty well on this assignment, after Mr. Carbone taught me how to do it I had very few errors.

2: I did ok on this assignment, I had errors finding my answers, but after seeing the teacher do it I could recreate their work.

1: I did not follow on this assignment. Without Mr. Carbone showing me every step I would not be able to solve these problems.