PSCC - Simple Interest Lesson
Simple Interest
Introduction
Banks love to hold your money for you! So much so, that some of them offer you interest that grows the longer you keep the money in the bank. It’s basically free money for just letting your money sit in their account! On the flip side, when you borrow money lenders tend to charge you interest, but we’ll get to that later in this course. Let’s take a look at how our money can make money for us.
Calculating Simple Interest
In Your Notebook: Watch the following video and take down important notes, such as formulas. Pause the video at times to attempt the practice examples on your own before viewing the solutions!
Using the Simple Interest Formula
There are several ways that you can use the formula for simple interest. Click through the interactive, or look at the transcript, to practice using this formula. Try to find the answer on your own before checking the solution.
Click here to view the transcript of the above interactive activity. Links to an external site.
Using a Spreadsheet Program 📊
A spreadsheet program can be used to store data and calculate values. During this course, you will be shown how to use Microsoft Excel and included formulas to determine and compare different calculations. You can even use this program to create a graph of your data! Microsoft Excel is included with your Georgia Virtual O365 account. You are encouraged to use the online version or download the program to your computer. You can use this spreadsheet program for all calculations within this course.
Calculating Simple Interest in Excel
Franklin deposited $1500 in his savings account. The account pays an annual interest rate of 8.25%. He makes no more deposits or withdrawals. After 6 months, the interest was calculated. Find the amount of simple interest he earned.
- Open a new spreadsheet.
- Create headers to organize your information.
- Input the information that we are given. Be sure to choose the correct type of value in the dropdown. The value of 1500 should be classified as currency, the value of 8.25 should be classified as a percentage, and the value of 3 as a number.
- To enter a formula, you type in an equal sign and then the formula. If you are using a value in a different cell in this formula, the location of that cell (A2, C1, etc) must be used.
- In the Total Interest column, we will want to multiply 1500 (A2) times 8.25% (B2) times 3/12 (C2/12). To do this type an equal sign, then click on the cell that contains 1500, type an asterisk (*), then click on the cell that contains 8.25%, then type another asterisk (*), click on the cell that contains the 3, type in "/12" and then click enter.
- Your formula should look like this: =A2*B2*C2/12
- Your formula should look like this: =A2*B2*C2/12
- In the Total in Savings column, we will want to add the initial deposit (A2) and the total interest (D2).
- Your formula should look like this: =A2+D2
- Your formula should look like this: =A2+D2
- Now that you have all of the formulas set, try changing the number of months or the initial deposit. The total interest and total in savings will automatically change with it!
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