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Simple Interest
- Interest on the principal amount only
- Does not include interest-on-interest
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Example: Simple Interest
You deposit $1,000 into an account earning 10% simple interest per year. How much will you have in the account in 3 years?
Practice: Simple Interest
Steve just deposited $5,000 into an account earnings 7% simple interest. How much will Steve have in his account in 8 years?
Practice: Simple Interest
You deposit $4,000 today at the bank. At the beginning of year 3 you deposit another $25,000. Your bank pays a simple interest rate of 8% a year.
How much do you have in your bank account at the end of 5 years?