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mgf1107lecture26

# mgf1107lecture26 - i = Prt = = So the total amount due is...

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MGF 1107 – EXPLORATIONS IN MATHEMATICS LECTURE 26 Simple Interest Interest is the money the borrower pays for the use of the lender’s money. One type of interest is called simple interest . Simple interest is based on the entire amount of the loan for the total period of the loan. The formula used to calculate simple interest is Interest = Principal x Rate x Time i = P x r x t where the principal, P, is the amount of money lent, the rate, r, is the interest rate expressed as a decimal, and the time, t, is the period for which the money will be lent. Time is expressed using the same period as the interest rate. So if the interest rate is 5% per month, then the time must be expressed in months. Ex. If \$5000 is borrowed at a rate of 10% annual simple interest, and the loan is for 9 months, what is the total amount that must be paid back at the end of this period? We first calculate the interest using the formula above, and then add this to the principal to get the full amount due.

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