Back To Course

GED Math: Quantitative, Arithmetic & Algebraic Problem Solving10 chapters | 73 lessons | 7 flashcard sets

Instructor:
*Jeff Calareso*

Jeff teaches high school English, math and other subjects. He has a master's degree in writing and literature.

In this lesson, we'll learn how simple interest can earn (or cost) you money. We'll also look at percent change problems to better understand how discounts and markups work.

Few things you'll learn in math are as useful as operations with percents. Once you understand concepts like simple interest and percent change, you'll have knowledge that can literally put money in your pocket.

**Simple interest** is just what it sounds like: an easy way of calculating how much interest you can earn (or owe). Let's say you put some money in the bank and it's earning interest. The money you start with is your principal. The word 'principal' also means first, so this money is where your investment starts. Simple interest is a way of calculating just how much money your principal is earning you.

**Percent change** is closely related. Every time you see a sale advertising '30% off!' or if you want to leave a 20% tip at a restaurant, you're dealing with percent change. As with simple interest, you start with a principal amount. The percent change is the amount that principal increases or decreases. Let's look at examples of both of these ideas.

Let's start with simple interest. What if you deposit $500 and you'll earn 4% interest over 3 years. To calculate how much money your principal investment will earn you, we need a formula: ** I = prt**.

*I* is for interest, of course. That's what we want to find. To get it, we just need to know three things: what we start with (the principal, or *p*), the interest rate (*r*) and the time (*t*) the money needs to sit.

Here, the principal is $500, the rate is 4% (or .04) and the time is 3 years. If we plug that into *I* = *prt*, we get *I* = (500)(.04)(3). That gets us $60. So you can earn $60 just by letting your money sit around for 3 years.

Sometimes, simple interest doesn't get you money, it costs you money. Imagine you borrow $800 from your friend Steve to help you buy a life-size statue of Bigfoot. You'd use your own money, but remember that it's locked away earning that 4% interest. This statue is a weird investment, but it's great of Steve to help. Well, not that great. You promise to pay Steve back in 2 years, but he'll charge you 7% interest.

To find out how much you'll need to pay Steve back, use the same formula: *I* = *prt*. This time, the principal is $800, the interest rate is 7% (or .07) and the time is 2 years. So that's *I* = (800)(.07)(2). That gives us $112.

But that's not what you owe Steve. If you recall, the formula you just used was to find the *interest.* You owe Steve the $112 interest plus the original $800. So the amount you'll have to pay back is $800 + $112, or $912. But, you know, life-size Bigfoot statue!

You're expecting your Bigfoot statue to go up in value. The guy who sold it to you said it should be worth 30% more than you paid for it. That's great! But how much is that in cold, hard cash? You paid $800 of your moneyâ€¦ well, Steve's money. What is 30% more than $800?

This is a percent change problem. Since we want to find out what 30% more than our principal is, we're essentially figuring out what 130% of $800 is. (Remember, 100% of $800 is just $800.) 130% can be written as 1.30. To find the projected value of your statue, we multiply: $800 * 1.3. This gets us $1040. That's a nice increase!

Note that this is the same way you'd calculate a tip. If a check comes for $32 and you want to leave a 20% tip, just multiply $32 * 1.20 to get $38.40. That's the principal plus the tip.

As for your statue, the weeks go by and no one wants to buy it. And Steve really wants his money back. It turns out flipping Bigfoot statues for profit isn't a good business. You finally decide to offer it for 25% off your $1040 asking price. What will this be?

You could multiply $1040 by .25. That gets you $260. So you're offering $260 off. $1040 - $260 is $780. Or, you could multiply $1040 by .75. In other words, just like 130% is 30% over 100%, 75% is 100% minus 25%. $1040 * .75 = $780. Well, that's not going to help you pay back Steve.

So let's try one more thing. You need to pay Steve $912. You were asking $1040 for the statue. What's the percent off you could offer to get you $912?

To find the percent change, use this formula:

Our new value is $912. Our old value is $1040. 912 - 1040 = -128. We divide that by the absolute value of 1040. -128/1040 = -0.12. Finally, we multiply that by 100%: -0.12 * 100% = -12%. The negative sign means the new value is 12% less than the old value.

It's not as impressive sounding as 25% off, but it'll help you pay off Steve.

In summary, we learned about simple interest and percent change. **Simple interest** is how you calculate how much interest a sum of money will accumulate. The formula is ** I = prt**, or interest = (principal)(rate)(time). We also looked at

To unlock this lesson you must be a Study.com Member.

Create your account

Are you a student or a teacher?

Already a member? Log In

BackDid you know… We have over 160 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.

To learn more, visit our Earning Credit Page

Not sure what college you want to attend yet? Study.com has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.

You are viewing lesson
Lesson
3 in chapter 5 of the course:

Back To Course

GED Math: Quantitative, Arithmetic & Algebraic Problem Solving10 chapters | 73 lessons | 7 flashcard sets

- GRE Information Guide
- Computer Science 310: Current Trends in Computer Science & IT
- Earth Science 105: Introduction to Oceanography
- Computer Science 331: Cybersecurity Risk Analysis Management
- Computer Science 336: Network Forensics
- World Literature: Drama Since the 20th Century
- Visual Art Since the 18th Century
- World Literature: Drama Through the 19th Century
- Defamation, Libel & Slander
- Elements of Music Overview
- ILTS Prep Product Comparison
- CTEL Prep Product Comparison
- TASC Prep Product Comparison
- FSA Prep Product Comparison
- SHSAT Prep Product Comparison
- MEGA Test Accomodations
- Study.com Grant for Teachers

- Materials & Resources for an Early Childhood Classroom
- Obstructive Shock: Causes, Symptoms & Treatment
- Interpreting & Calculating Seasonal Indices
- Managing Classroom Behaviors of Young Children
- Taekwondo Lesson Plan
- Normalization & Invisibility of Privilege in the Workplace
- Practical Application: Reducing Job Stress Using Time Management
- Solving Equations Using the Least Common Multiple
- Quiz & Worksheet - Real-World Applications of Learning
- Quiz & Worksheet - Dante's Inferno 4th Level of Hell
- Quiz & Worksheet - Coaching Agreements
- Quiz & Worksheet - Third-Person Pronouns
- Quiz & Worksheet - Code of Ethics for Teaching
- Flashcards - Measurement & Experimental Design
- Flashcards - Stars & Celestial Bodies

- Special Education Assessment in the Classroom
- Praxis Marketing Education (5561): Practice & Study Guide
- LSAT Test: Online Prep & Review
- How to Choose a Career: Guidance Counseling
- TOEIC Speaking & Writing: Test Prep & Practice
- Second Derivatives
- OAE - Integrated Science: Human Body Systems
- Quiz & Worksheet - Normal Fault
- Quiz & Worksheet - Globalization & Politics
- Quiz & Worksheet - The U.S. Criminal Justice Process
- Quiz & Worksheet - Features of Transform Boundaries
- Quiz & Worksheet - History of Policing in America & Its Impact

- What is Fog? - Definition, Types & Causes
- What is a Chattel Mortgage? - Definition & Example
- What Are the SAT Test Registration Deadlines?
- 5th Grade Writing Prompts
- Average PSAT Score for Sophomores
- How Long Should I Study for the MCAT?
- What is the NYS Regents Scholarship?
- How to Get Tuition Reimbursement
- What Is the Common Core Standards Initiative?
- What Are Common Core Standards?
- Study.com Demo for Enterprise
- How to Pass an AP Class

- Tech and Engineering - Videos
- Tech and Engineering - Quizzes
- Tech and Engineering - Questions & Answers

Browse by subject