mgf1107lecture26 - i = Prt = ( ) = So the total amount due...

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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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Unformatted text preview: i = Prt = ( ) = So the total amount due is Ex. If at the end of a six month loan period a borrower repays the original $300, plus $30 in interest, what was the rate of interest? Using the formula i = Prt, we get So r = , corresponding to an interest rate of Ex. Which of the following two scenarios involving a $2000 purchase entails paying the higher simple interest rate? i) Paying $1000 as a down payment and then $1150 in 6 months. ii) Paying $500 as a down payment and then $1700 in 6 months. i) In this case the principal is the cost of the purchase minus the down payment, and the interest is the total of the payments minus the cost of the purchase. So i = Prt So the interest rate is ii) In the second case the principal is 2000 500 = $1500, and the interest is (500 + 1700) 2000 = $200. So i = Prt So the interest rate is Ex. (10.B.25) Ex. (10.B.27) Ex. (10.B.29) Ex. (10.9) http://www.bankrate.com/calculators.aspx...
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mgf1107lecture26 - i = Prt = ( ) = So the total amount due...

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