Calculating Simple Interest Worksheets
In order to buy things that we do not have the money to pay for like a house or car we will often borrow money from banks or other financial institutions. These organizations lend their money to you in order to get extra money called interest as a benefit. Simple interest is the rate at which financial lenders calculate to charge their borrowers. This is the incentive that the lender receives for letting people borrow their money. The higher the rate, the more money that will be owed by the borrower. The rates can greatly fluctuate over the years. People in long term loans will often re-evaluate the rates several times throughout the life of the loan. These worksheets help students learn the concept of financial interest and how to determine it.
Aligned Standard: 7.RP.A.3
- Robert Borrows So Loot Step-by-Step Lesson- How much will Robert own in six months?
- Guided Lesson - The first problem is very challenging. After I wrote it, I had to check my answers several times.
- Guided Lesson Explanation- Tabling and modeling these problems does help a lot.
- Practice Worksheet - Some more complex word problems for you to have fun with
- Matching Worksheet - Match the values to the tables or problems that created them.
- Answer Keys - These are for all the unlocked materials above.
Simple Interest Practice Sheets
Use the formula to help you find the simple interest and total cost of the following problems.
- Independent Practice 1 - This sheet will help you learn to calculate both the interest and total cost.
- Independent Practice 2 - Determine the amount of simple interest you would incur in the following money borrowing scenarios. There are several different problems that focus all on the same skill.
- Independent Practice 3 - Brady decides to purchase a trip to London. After the airfare, lodging, and meals are calculated it will cost $3,250 for a weeklong stay. Brady charges the cost of the trip on a credit card with an interest rate of 13.5%. If it takes Brady 3 years to pay back the cost of the trip, how much will Brady pay in total?
Homework Sheets
You will use a wide range of skills to complete all of the homework.
- Homework 1 - This homework sheet covers the major skills in a very matter of fact approach.
- Homework 2 - We are solely focused on the increased costs of taking out a loan.
- Homework 3 - Halley and Jason bought a new home for $185,000. They take out a loan from Astar Bank to pay for their home. The terms of the loan are 6.5% for 30 years. If the pay the loan off over the 30 years, how much interest will they have paid to Astar Bank?
Quizzes
Time to see how well you understand the concepts that are presented in this topic.
- Quiz 1 - Who doesn't what to be able to calculate this value?
- Quiz 2 - I learned this skill in school, but until you have taken out your first loan it doesn't really sink in how much each percentage point means.
- Quiz 3 - Mike buys a Certificate of Deposit (CD) for $45,000.00. The terms of the CD are 4.55% for 12 years. When the CD expires how much total money will Mike receive?
How to Calculate Interest
When it comes to solving money problems, calculating interest is one of the trickiest types of exercises that can confuse the students. It is crucial to develop strong skills in solving money problems as we have to incorporate these concepts into our day-to-day operations.
There are two types of commonly explored forms of interest these include simple and compound. Simple interest is a quick way to determine money owed on loan of some kind. It takes into account the agreed upon interest rate, amount borrowed, and the length of time the money will be loaned. This usually only applies to very short-term borrowing situations. When you borrow money, you have to pay the fee in the form interest which is equal to some percent of the amount you borrowed. This is the benefit that the lender receives for giving you access to money. The simple form is when you pay the same amount of interest every year. You can calculate this by using a simple formula;
Simple = principal amount borrowed × rate × time or I = Pr t.
All you need to know is the principal amount borrowed, the rate that is set by a lender, and the time you have borrowed the money for.
Compound forms of interest are where things get a bit complex. When you consider compound forms, the new end cost for every year adds together. Meaning that the overall principal grows much quicker and contributes to the future principal amount. For example, you borrow money for two years. You can use the simple formula to calculate the cost for the first year. For the next year, the interest of the first year will add to the principal amount, and then the cost will be calculated on the new amount.
Most of these calculations can vary greatly based on the interest rate and the method used to calculate the compound of it. It comes in many different forms. Each has a different set of features and benefits for both the lender and the borrower. Here is a look at the basic forms:
Fixed - This is a set rate that lasts the life of the loan. It can be helpful for both parties because they know exactly what they will pay or receive as a result of entering into this relationship.
Variable - These rates fluctuate and change often. The value is usually determined based on a standard (prime) interest rate. Borrowers will as a result have unspecified payment schedule. These loans tend to favor the lender to help them get a return close to or slightly better than the current market rate.
Why Is Understanding the Concept of Interest So Important?
This concept is glanced over in most math classes, but it can have a huge impact on your life in adulthood. If you are lucky, you will get an opportunity to take a personal finance class in High School. If you get the opportunity, I implore you to take it and pay the utmost attention to detail. This principal is the foundation of the American economic system. It has the biggest influence of how much money you will owe in a borrowing situation and how much return you will get on your savings. I will not go into much detail on the different types of rates that help money to flow through the banking system, but it is substantial, to say the least. While most people will understand savings accounts rates and how they work, borrowing is an entirely different animal. When people take out their first personal loan, they are simply happy to have someone else pay for items that they really want. You need to realize that they are not giving you the money because they have to. You are purchasing a financial product that is aimed to make the lender more money. Like any product lenders have competition to get you interested in theirs. You should spend your time reviewing the terms and understand which best suits your situation. When it comes to mortgages (loans for purchasing homes) you have tons of options and you need to take your time to find a loan that works for you. I would encourage you to do your research. Many people think that they need to take out loans from local banks and lenders. If you do a quick Internet search, you will quickly realize that have literally hundreds of options. Making the best decision will greatly help you. Take my first home loan as an example. I had no idea what I was doing and took whatever loan my real estate agent advised. About a year later I realized that I paid 1.5% more than others that were available at the time. Over the life of 30-year loan, that was a $75,000 mistake. Do not make my mistake, do your research.