1 / 6

# Simple & Compound Interest - PowerPoint PPT Presentation

Simple & Compound Interest. Vocabulary. Interest: A fee paid by a borrower of money to the owner as compensation. Principal: The initial sum of money borrowed. Rate: The percentage used to calculate interest. Simple Interest.

I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.

- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript

### Simple & Compound Interest

• Interest: A fee paid by a borrower of money to the owner as compensation.

• Principal: The initial sum of money borrowed.

• Rate: The percentage used to calculate interest.

• Definition: Interest is calculated as a percentage of only the principal amount.

• Formula for interest: I = P × r × t

I= interest, P = principal, R = rate, T = time

• Example: Adam borrows \$250 from Brandy at a 12% simple interest rate. How much does Adam owe in 8 years?

• Definition: Interest calculated as a percentage of the principal and the previously accrued interest.

• Formula: A = P(1+r)t

A = Total amount at time “t”

• Example: Kristy borrows \$1200 from Dylan at 18 percent interest compounded annually. How much does Dylan owe in 14 years How much did he pay in interest?