Section 1

Discover

 

In this section you will derive the formula to find simple interest.

 

Try This 1

 

Use the Simple Interest Calculator to help investigate how simple interest is calculated. Click on the play button.

 

PART 1: Manipulating the Interest Rate (r)

1. Using the Simple Interest Calculator, what is the interest earned on $100 for one year at
   
   
   1. 4%
   2. 10%
      
      
2. Without using the calculator, can you predict how much simple interest you will earn when you invest $100 for one year at an interest rate of 20%? Check your answer using your calculator.
   
   
3. How do you think the Simple Interest Calculator calculated the values for questions 1 and 2?

PART 2: Manipulating the Time (t)

1. Using the Simple Interest Calculator, what is the interest earned on $100 at an interest rate of 5% for
   
   
   1. 1 year
   2. 2 years
      
      
2. Without using the calculator, can you predict how much simple interest you will earn when you invest $100 for 10 years at an interest rate of 5%? Check your answer using your calculator.
   
   
3. How do you think the Simple Interest Calculator calculated the values for questions 1 and 2?

PART 3: Putting It All Together

1. Based on your observations from Parts 1 and 2, suggest a formula for finding interest. Use the following symbols to build your formula.
   
   
   • I for interest
   • P for principal
   • r for the annual interest rate
   • t for the time in years

Save your answers to your course folder.

 

Share 1

 

As you are working on this Share section, refer to the Share Rubric. This information will help you understand what your teacher expects of you.

 

Share your responses to the Part 3 question from Try This 1 with a classmate or group. 

• How did your formula for finding interest compare with other students’ formulas? Why might there have been similarities and differences between the formulas?
  
  
• Use your formulas to find what the total interest on $6000 at 5% would be after ten years. Use the Simple Interest Calculator to check if your formulas are correct.

If required, save a copy of your discussion and calculation in your course folder.