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Simple Interest And Simple Discount

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Simple Interest And Simple Discount
BUSINESS
MATH

Simple Interest and
Simple Discount

Business Math, Eighth Edition
Cleaves/Hobbs

© 2009 Pearson Education, Inc. Upper Saddle River, NJ
07458 All Rights Reserved

11.1 The Simple Interest Formula


Find simple interest by using the simple interest formula.



Find the maturity of a loan.



Convert months to a fractional or decimal part of the year.



Find the principal, rate or time using the simple interest formula.

Business Math, Eighth Edition
Cleaves/Hobbs

© 2009 Pearson Education, Inc. Upper Saddle River, NJ
07458 All Rights Reserved

Key Terms


Interest: an amount paid or earned for the use of money.



Simple interest: interest earned when a loan or investment is repaid in a lump sum.



Principal: the amount of money borrowed or invested. 

Rate: the percent of the principal paid as interest per time period.



Time: the number of days, months or years that the money is borrowed or invested.
Business Math, Eighth Edition
Cleaves/Hobbs

© 2009 Pearson Education, Inc. Upper Saddle River, NJ
07458 All Rights Reserved

11.1.1 The Simple Interest Formula


The interest formula shows how interest, rate, and time are related and gives us a way of finding one of these values if the other three values are known.

I=PxRxT

Business Math, Eighth Edition
Cleaves/Hobbs

© 2009 Pearson Education, Inc. Upper Saddle River, NJ
07458 All Rights Reserved

Find the simple interest using the simple interest formula

Business Math, Eighth Edition
Cleaves/Hobbs

© 2009 Pearson Education, Inc. Upper Saddle River, NJ
07458 All Rights Reserved

Identify the principal, rate and time
P=RxB


The interest is a percentage.



Principal is the amount borrowed or invested.



Rate of interest is a percent for a given time period, usually one year.



Time must be expressed in the same unit of time as the rate. (i.e. one year)
Business Math, Eighth Edition
Cleaves/Hobbs

© 2009 Pearson Education, Inc. Upper Saddle River, NJ
07458 All Rights Reserved
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