# Week 2 - Lesson 1 - Simple Interest Basics

## The basics of working with simple interest including notation, the formula, working with dates and examples.

FinanceSimple Interest

# Week 2 - Lesson 1 - Simple Interest Basics

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The basics of working with simple interest including notation, the formula, working with dates and examples.
Slide Content
1. ### Slide 1 - Simple Interest – Lesson 1Simple Interest Basics

• Rob Sorensen
2. ### Slide 2 - Rob Sorensen

• Simple Interest Terminology
• P = principal
• I = simple interest
• r = the interest rate
• t = time
• Generally, we express the interest rate and time in years.
• Lender
• Borrower
• Principal
• Interest
• Amount Borrowed
• Cost
• Profit
• Amount Loaned
3. ### Slide 3 - Simple Interest Formula

• The basic formula for simple interest is:
• I = Prt
• Rob Sorensen
• 3
4. ### Slide 4 - Example

• Suppose that you borrow \$500 for one year at a rate of 6%. How much interest will you pay?
• Rob Sorensen
• 4
5. ### Slide 5 - Rob Sorensen

• Working with Dates
• Usually, the rate is given as an annual rate so we need the time period to be in years as well.
• If the time is given in months, we can divide by 12 (i.e. 3 months means that t=3/12).
• When using dates, however, we need to work with the exact number of days and then divide by 365.
• To do this, you can use the date function on your calculator.
6. ### Slide 6 - Rob Sorensen

• Using Dates (Ex. 1.1C)
• Compute the amount of interest on \$785.95 borrowed at 8% p.a. from Jan 30, 2015 until Mar 21, 2015.
7. ### Slide 7 - Rob Sorensen

• Try It Out!
• How many days have you been alive?
• How much interest would you have earned if your parents had invested \$1,000 at a simple interest rate of 9% p.a. when you were born?