Simple interest

Simple interest

When you borrow money, interest is charged for the use of that money for a certain period of time. Both the borrowed amount (principal) and the interest are paid back. Simple interest is a flat rate of interest where the same amount is charged (and paid back) for each repayment period over the life of the loan.

Complete these two activities.

Save this simple interest (XSLX 12kB) spreadsheet template to your laptop (right click > Save Target As).

For section A:

  1. Why is the formula =C6*D6*E6 written in the cell F6?

  2. Why is the decimal 0.05 used in cell D6?

  3. What formulae should appear in G6 and H6?

  4. Copy down to complete the grey cells in the table.

For section B:

  1. Why is the formula =F13/(D13*E13) written in the cell C13?

  2. What ‘reverse’ formulae should appear in D14 and E15?

  3. Write formulae in the grey cells to complete the final column.

Record your answers within the spreadsheet.

Copy the following questions into OneNote, Word or Google Docs and answer them. You may find creating a spreadsheet to be useful in working on these questions.

  1. Kerry invests $5000 for 4 years at a simple interest rate of 5%pa. Kevin claims that he will earn twice the interest if he invests the same amount for double the time. Kiah claims that he will get double the interest if he invests double the amount for the same period of time. Can both Kevin and Kiah be correct? Explain.
  2. Agnetha borrowed $22 000 over 4 years at a simple interest rate of 8% pa. Calculate the simple interest and total amount. How much is each equal monthly repayment?
  3. What adjustments need to be made to the tables in the spreadsheet for a fortnightly payment?
  4. Calculate the interest Jason earns on $6780 invested at 7% pa for 18 months.
    1. Calculate the simple interest rate which will allow $3400 to earn $1200 interest in 4 years.
    2. What sum of money should be invested for 5 years at a simple interest rate of 11% to produce $3080 in interest?
    3. For how many years would $5000 need to be invested at 6.75% pa simple interest to produce $2700 in interest?

Share your completed document and spreadsheet with your teacher.