Simpleinterest3

Simple Interest

If you put money into a bank. The 'extra' money you get from the bank for depositing your money is called simple interest. Also if you borrowed money from a bank the money they would charge you for lending that money is also called simple interest. However the amount you put in or borrowed from the bank shouldnot be changed for the simple interest to be the same each year.

To calculate simple interest

1. multiply the principal by the rate of interest by the time in years'
2. divide by 100.

I=(P x R x T)/100

What is the principal, rate of interest and time?

The principal is the amount of money a person puts in the bank or borrows. The rate of interest is the % they wound give you or charge you on the principal and The time is how long (in years) you have the money in the bank or is given to repay the loan.

Example

Sharon borrows $14000 for Scotia bank for 5 years and 6 months, the rate of interest of the bank is 11% . Find: the simple interest the amount she has to pay back altogether and the amount she has to pay each month, if she decides to pay on a monthly basis.

The simple interest = ($14000 x 11% x 5.5yrs)/100 = $8,470

The amount she has to pay back altogether =her principal + the interest

                                         =$14,000 + $8,470= $22,470

The amount she has to pay every month =The amount she has to pay back altogether / the number of months.

                                     =$22,470/66mts =$340.45

Question

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