2. I=PxRxT
Where:
I = the Interest Money created in dollars
P = the “Principal” starting amount of money
R = the Interest Rate per year (in decimal form)
T = the Time the money is Invested,
or Borrowed, in Years
3. Interest can be calculated to be paid as
Half-Yearly, Quarterly, Monthly, or Daily.
"T" needs to be entered as a fraction of a year, into
I = PRT, because the Interest Rate is in units of years.
Half Yearly : T = 1/2
Quarterly : T = 1/4
Monthly : T = 1/12
Daily : T = 1/365
4. Tahli borrows $2000 to buy a new TV at 18.5% pa
Simple Interest charged 6 monthly, to be paid back
over 2 years. What is the Interest each 6 months?
I = PRT (T = ½ year)
I = $2 000 x 0.185 x 1/2
I = $ 185 every 6 months
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5. Tahli borrows $2000 to buy a new TV and pays $185
Interest charged every 6 months, to be paid back
over 2 years. What is the Total Interest paid ?
Total I = $185 x 4 lots of 6 months
(2 year Loan = 6mths + 6mths + 6mths + 6mths)
= $185 x 4
= $740
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6. Tahli borrows $2000 to buy a new TV and pays
a total of $740 Interest over 2 years. What is the
Total Amount to be paid back ?
Total Amount = Principal + Total I
= $2000 + $740
= $2740
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7. Alexandra borrows $20 000 to set up a Beautician
business at 16% pa Simple Interest charged
Quarterly, to be paid back over 5 years and 3
months. What is the Interest each Quarter?
I = PRT (T = 1/4 year)
I = $20 000 x 0.16 x 1/4
I = $ 800 every Quarter
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8. Alexandra borrows $20 000 for her business and pays
$800 Interest charged Quarterly, to be paid back over 5
years and 3 months. What is the Total Interest paid ?
Total I = $800 x 21 lots of 3 mth Quarters
- 5 year 3mth Loan = (5 x 4 Quarters per year) + ¼ year
= $800 x 21
= $16 800
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9. Alexandra borrows $20 000 for her business, and
pays a total of $16 800 Interest over 5 yrs 3 mths.
What is the Total Amount she pays back ?
Total Amount = Principal + Total I
= $20000 + $16 800
= $36 800
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10. Joyce Deposits $2 000 into an Internet Saver Account
that gives her 5.4% pa Interest paid Monthly. She
leaves the money there for 2 ½ years.
What is the Interest she earns each Month?
I = PRT (T = 1/12 year)
I = $2 000 x 0.054 x 1/12
I=$9 every Month
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11. Joyce Deposits $2 000 into an Internet Saver Account that
gives her $9 in Interest paid Monthly. She leaves the
money in the account for 2 and1/2 years.
What is the Total Interest paid ?
Total I = $9 x 30 lots of One Month
- 2 ½ year Loan = (2 x 12 Months per year) + 6 months
= $9 x 30
= $ 270
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12. Joyce Deposits $2 000 into an Internet Saver Account
that gives her $270 in Interest over 2 ½ years.
What is the Total Amount now in her Account ?
Total Amount = Principal + Total I
= $2000 + $ 270
= $2 270
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13. Interest is calculated for the month on the
following Bank Account’s “Minimum Monthly
Balance” using an Interest Rate of 3% pa.
Calculate the Total Interest for the Month.
Date Transaction Balance
June 1 $ 420
June 12 $ 300 Withdrawal $ 120
June 21 $ 250 Deposit $ 370
14. Date Transaction Balance
June 1 $ 420
June 12 $ 300 Withdrawal $ 120
June 21 $ 250 Deposit $ 370
The “Minimum Monthly Balance” is the lowest
balance for the month which is $120. June is a
30 day month, and so Time in Years = 30/365.
Interest Rate is 3% pa = 0.03 Now Use I = PRT
I = $120 x 0.03 x 30/365 = $ 0.29
15. Interest is calculated DAILY on the following
Bank Account’s current balance at the end of
each day using a Rate of 4% pa.
Calculate the Total Interest for the Month.
Date Transaction Balance
May 1 $ 540
May 18 $ 300 Deposit $ 840
May 25 $ 100 Withdrawal $ 740
16. For calculating Daily Interest we will need to do
a separate calculation for each Balance.
We also need to know how many days the
account had that balance. Therefore we add a
“Number of Days” Column onto our table:
Date Transaction Balance Number of Days
May 1 $ 540 (1 to 8) = 8
May 9 $ 300 Deposit $ 840 (9 to 19) = 11
May 20 $ 100 Withdrawal $ 740 (20 to 31) = 12
May 31 (May has 31 days) <<Count Days on your fingers>>
17. Date Transaction Balance Number of Days
May 1 $ 540 (1 to 8) = 8
May 9 $ 300 Deposit $ 840 (9 to 19) = 11
May 20 $ 100 Withdrawal $ 740 (20 to 31) = 12
May 31 <<Days / 365 to make Years units>>
Interest Rate is 4% = 0.04 Now use Balance $ and
Days to Calculate PRT for each Balance:
May 1 to 8 : PRT = 540 x 0.04 x 8/365 = $ 0.47
May 9 to 19 : PRT = 840 x 0.04 x 11/365 = $ 1.01
May 20 to 31 : PRT = 740 x 0.04 x 12/365 = $ 0.97
TOTAL DAILY INTEREST FOR MONTH = $ 2.45