10.2 Simple Interest Loans

• We need to understand simple interest loans because all other types of loans are built on this concept.
• You don't normally get a simple interest loan.
  • Installment loans are much more common.
• Sort of a "loan me $10 and I will pay you $11 later" type of thing.
• Four basic components
  • The principal is the amount of money borrowed
  • The period or time, is the time the money is borrowed
  • The interest rate, or just rate, is the rate charged for the money
  • The interest is the amount the borrower pays for use of the money.
  • interest = principal × rate × time
  • i=prt
• The Amount to pay is the principal plus the interest.
  • A = p + prt
• The interest rate and the period should be in the same terms.
  • Banks consider a year to have 360 days for most loans.
  • IE: 1 year = 360 days
• Do some problems page 580, 9-18
• Sometimes we need to solve for one of the other quantities
  • i = prt
  • t = i/pr
  • p = i/tr
  • r = i/pt
• Do some problems page 580 19-24
• Do some problems 580 25-28
• A discount note or bank discount is a simple interest loan with a twist.
  • The interest is charged in advance.
  • So the principal is really the amount, but don't worry.
  • Just work the loan twice.
• Do some problems 581 29-30
• If time, do 31 or 32.