Introduction
Today, we will be learning about Interest, more specifically - Simple Interest
Variables to remember
So the formula for working out interest is
- I = P x R x T
As an easy example, consider how much interest we will get by investing R10 000 at a rate of 5% over a period of one year.
I = P x R x T
I = R10 000 x 5% x 1
I = R500
We will receive R500 interest
Task
You will also be required to calculate the investment/loan, interest rate and years.
The Simple Interest Pyramid below shows how we can manipulate the variables
Interest Rate
- R = I / (P)(T)
Investment
- P = I / (R)(T)
Years
- T = I / (P)(R)
Process
Example 2:
Shirley got a R1 200 loan for 2 years. She paid R90 in interest. What was the interest rate?
Example 3:
Doug made a 3 year investment. The interest rate was 4.5%. After 3 years, he earned R675 in interest. How much was his original investment?
Example 4:
Kim got a loan for R4 700 to buy a used car. The interest rate was 7.5%. she paid R1 057.50 in interest. How many years did it take to off her loan?
Evaluation
Example 2:
I = R90
P = R1 200
R = ?
T = 2
Therefore, R = I / (P)(T)
R = 90 / (1200)(2)
- Answer is: 3.75%
Example 3:
I = R675
P = ?
R = 0.045
T = 3
Therefore, P = I / (R)(T)
P = 675 / (0.045)(3)
- Answer is: R5 000
Example 4:
I = R1 057.50
P = R4 700
R = 0.075
T = ?
Therefore, T = I / (P)(R)
T = 1057.50 / (4700)(0.075)
- Answer is: 3 years
This video will assist in showing the pyramid and how to work through Examples 2-4
Conclusion
Important to remember that:
Interest is the amount of money added to a investment or loan.
Simple Interest is interest calculated only on the initial amount that you invested or borrowed.
Credits
Teacher Page
Additional Resource for educators which includes more assistance in Simple Interest.
*The manipulation of the Simple Interest Pyramid is very important
http://www.alamandamaths.com/number-and-algebra/money/solve-problems-involving-simple-interest/