Percent - XYZ Custom Plus

Example 1InterestAnyone who has borrowed money from a bank or other lending institution, orwho has invested money in a savings account, is aware of interest. Interest is theamount of money paid for the use of money. If we put $500 in a savings accountthat pays 6% annually, the interest will be 6% of $500, or 0.06(500) = $30. Theamount we invest ($500) is called the principal, the percent (6%) is the interestrate, and the money earned ($30) is the interest.A man invests $2,000 in a savings plan that pays 7% peryear. How much money will be in the account at the end of 1 year?Solution We first find the interest by taking 7% of the principal, $2,000:5.6ObjectivesA Solve simple interest problems.B Solve compound interest problems.Practice Problems1. A man invests $3,000 in a savingsplan that pays 8% per year.How much money will be in theaccount at the end of 1 year?Interest = 0.07($2,000)= $140The interest earned in 1 year is $140. The total amount of money in the accountat the end of a year is the original amount plus the $140 interest:$2,000 Original investment (principal)+ 140 Interest (7% of $2,000)$2,140 Amount after 1 yearThe amount in the account after 1 year is $2,140.Example 2A farmer borrows $8,000 from his local bank at 12%. Howmuch does he pay back to the bank at the end of the year to pay off the loan?Solution The interest he pays on the $8,000 isInterest = 0.12($8,000)= $9602. If a woman borrows $7,500from her local bank at 12%interest, how much does shepay back to the bank if she paysoff the loan in 1 year?At the end of the year, he must pay back the original amount he borrowed($8,000) plus the interest at 12%:$8,000 Amount borrowed (principal)+ 960 Interest at 12%$8,960 Total amount to pay backThe total amount that the farmer pays back is $8,960.A Simple InterestThere are many situations in which interest on a loan is figured on other thana yearly basis. Many short-term loans are for only 30 or 60 days. In these caseswe can use a formula to calculate the interest that has accumulated. This type ofinterest is called simple interest. The formula iswhereI = P ⋅ R ⋅ TI = InterestP = PrincipalR = Interest rate (this is the percent)T = Time (in years, 1 year = 360 days)5.6 InterestAnswers1. $3,240 2. $8,400345