Simple Interest

Dr. Adeel Nasir

Simple Interest
• Simple interest applies only to the principal, or the original amount
borrowed, and it is usually used for loans lasting less than 1 year.
• Simple interest is interest charged on the entire principal for the
entire length of the loan
• Principal is the loan amount, rate is the interest rate, and time is the
length of the loan in years
Simple Interest
Simple Interest
Simple Interest
Maturity Value
• The amount that must be repaid when the loan is due is the maturity
value of the loan. Find this value by adding principal and interest.
Promissory Note
• A promissory note is a legal document in which one person or firm
agrees to pay a certain amount of money, on a specific day in the
future, to another person or firm
Finding due date
• Use a table to find the number of days from one date to another. Up
to this point, the period of the loan was given in months, but it can
also be given in days. Or a loan may be due at a fixed date, such as
April 17, and we may have to figure out the number of days until the
loan must be paid off
Find Exact and ordinary interest
• A simple interest rate is given as an annual rate, such as 7, per year. Since
the rate is per year, time must also be given in years or fraction of a year
when using I = PRT. If time is given in number of days, first change it to a
fraction of a year.

• Exact interest calculations require the use of the exact number of days in
the year, 365 or 366 if a leap year.
• Ordinary interest, or banker’s interest, calculations require the use of 360
days.