©2016 Mr. Breitsprecher & BreitLinks (www.breitLinks.com) All Rights Reserved Simple Interest
Simple Interest Name: _____________________
How much will you have/pay?
Business math is not abstract. It is not about solving equations where variables stand for
numbers (algebra). It is about being able to calculate a useful value. Almost always, we are
calculating money values, interest earned or payed, or the time period we pay or earn interest.
There will be a few math calculations on our summative assessment for savings/investing, the
important skills is to understand the values. Typically, we use calculators or computers to
calculate financial data. However – we still need to have an idea about what type of number we
should get from our calculator or computer.
The purpose of practicing some math in Personal & Business Finance class is to develop an
awareness as to when a value is reasonable or when we should check a number to make sure it is
accurate. Please remember, in the 21
st
Century, it is not an acceptable excuse to say the
calculator or computer made a mistake. We can teach ourselves to catch mistakes and correct
them. Financial mistakes, if not quickly corrected, can be very expensive.
For simple interest – this is all you need to know:
p = Principle, or the amount of money we are saving or investing (note savings
accounts have interest rates too)
r = Interest Rate, or what we pay (or someone pays us) to use our money (or
when we use theirs). Please remember, you will be given interest rates as a
percentage and you must move the decimal places to the left to convert to 100’s
(do you see that the % sign is actually shorthand for “divide by 100”
t = time, how long we will be letting our money grow at a simple interest rate
R = Interest Earned which is calculated as p*r*t or = prt
A (amount) = Principle + Interest Earned or p+R
At its simplest level, here’s what you need to know to calculate how much money you have
(principal + interest earned) after you invest p (an amount of money, principle) at an i (interest
reate) for t (a period of time)
So we see, solving for A is a 2-step process:
1. Interest Earned (R) = prt
2. Amount (A) = principle + interest = p+R
Let’s make this simple. An example of this calculation follows. Please double check the math in
each example “A” that follows and then please write down the equation and do the second
example “B” on your own. PLEASE SHOW YOUR EQUATION IN ORDER TO EARN
CREDIT FOR THIS ASSIGNMENT.
1A. How much will we have if we start with
$318 and its earns 9% for a year?
R = $318 * 0.09 * 1; R = $28.62
A = $318 + $28.62 = 346.62
1 B. How much will we have if we start with
$520 and it earns 7% interests for a year.
