9-3: Simple Interest

Key Concept

When you deposit money in a bank account, the bank pays you interest for the right to use your money for a period of time.

Simple Interest Formula: I = p · r · t

A time line of simple interest.

Principal (p) is the original amount of money deposited.

Interest is calculated based on a percent of the principal. That percent is called the interest rate (r).

Time (t) is the number of years money is deposited.

Simple interest (I) is interest calculated only on the principal.

Part 1

Example Understanding the Simple Interest Formula

Suppose you deposit $400 in a savings account and keep it in the bank for 6 years. The annual interest rate is 5%. Identify each value in the simple interest formula.

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Table of Contents

Digits, Grade 7, Volume 1, Homework Helper Unit A: Number and Operations Unit B: Expressions, Equations, and Relationships Unit C: Measurement and Geometry Unit D: Proportionality English/Spanish Glossary Formulas Math Symbols Formulas Measures Properties