Simple interest

In this lesson for grade seven, students learn how to calculate simple interest, and research careers in which people need to understand simple interest.

A lesson plan for grade 7 Mathematics

By Tammie J. Dawkins-Smith and Cynthia Russell · Adapted by Sharon Abell, Peggy Dickey, and Barbara Turner

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CareerStart lessons: Grade seven

This collection of lessons aligns the seventh grade curriculum in math, science, English language arts, and social studies with potential career opportunities.

Page 2.6

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Related pages

• College collage: In this lesson for grade seven, students brainstorm careers in the sciences and research local colleges that offer degrees in those fields.

Related topics

• Learn more about careers and simple interest.

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Learning outcomes

Students will use the simple interest formula to calculate and understand simple interest.

Teacher preparation

Time required for lesson

Approximately 60 minutes. Homework time will be needed.

Materials needed

• Calculator for each student
• Overhead projector and pens
• Computer with internet access and projector to access the Bureau of Labor Statistics’ Occupational Outlook Handbook
• Optional: If you don’t have access to a computer and projector, you may print overviews of the careers discussed in this lesson and hand them out to students.
• “Simply Interest” activity sheet
• Transparency copy of “Simply Interest” activity sheet
• “Simply Interest” activity sheet answer key

Activities

1. Introduce vocabulary and variables for simple interest formula. (10 minutes)
   • Simple Interest (I) — amount of money paid or earned for the use of money
   • Principal (p) — the amount of money borrowed or invested
   • Rate (r) — the annual interest rate written as a decimal
   • Time (t) — the amount of time in years (If time is given in months, it must be written as a fraction. For example, 6 months would be 6/12 years or 0.5 years.)
2. Demonstrate several examples to help students gain an understanding of how to solve simple interest problems. (20 minutes)
   1. Joe deposits $200 in an account at his bank. The interest rate is 6%. How much interest will he earn in three (3) years?
      • I = prt
      • I = (200)(.06)(3)
      • I = $36.00. Joe will earn $36 in interest.
   2. Joe borrows $900 to fix his car. The bank charges 7% interest for two years. Find the total amount Joe will owe the bank.
      • I = prt
      • I = (900)(.07)(2)
      • I = $126. Now add the $126 interest to the original amount borrowed by Joe (principal amount = $900) for a total of $1026 owed to the bank.
   3. Jill needs to borrow $500 for only nine months. The bank charges 5½% interest. How much will Jill owe the bank?
      • I = prt
      • I = (500)(.055)(.75)
      • I = $20.625 (Money must always be rounded to the hundredth place)
      • I = $20.63 Now add the $20.63 to the $500 borrowed. The amount Jill owes to the bank is $520.63.
3. Have students brainstorm a list of careers in which people might use simple interest. (Answers may include bankers, sales representatives, retail managers, salespeople, mortgage brokers, etc.) (10 minutes)
4. Access the Occupational Outlook Handbook and project it for the students. Use the website’s search function to find information about some of the careers the students brainstormed. Discuss the careers with the class, and encourage them to think of how people in those careers might use simple interest formulas. Some examples include:
   • Loan officer: Usually works at a bank dealing with customers who are interested in borrowing money for cars, homes, home improvements, etc. Needs to know how to calculate interest in order to inform the customer how much money will need to be paid back to the bank each month to satisfy the loan.
   • Credit card company employee: Needs to know how to calculate interest so when customers buy something with the credit card, they can charge the customer that amount above the cost of the purchase. Most credit card companies have computer programs that will calculate this for them, but knowledge of this calculation helps when speaking to customers.
   • Car salesman: Needs to know how to calculate interest in case a customer asks for clarification on his or her bills. Even though most computer programmers calculate this automatically, the salesman needs to know how this amount is calculated so that he can answer any questions the customer will have.
5. Hand out the “Simply Interest” activity sheet. Have students work independently on the worksheet. Students who don’t finish the worksheet in class may complete it for homework. (20 minutes)