2 20%–D ATA A N A LY S I S , S TAT I S T I C S , A N D P R O B A B I L I T Y– C A L C U L A T I N G I N T E R E S TEXAMPLEKAI INVESTS $4,000 FOR NINE MONTHS

5

.2 20%–D ATA A N A LY S I S , S TAT I S T I C S , A N D P R O B A B I L I T Y–

C a l c u l a t i n g I n t e r e s t

Example

Kai invests $4,000 for nine months. Her invest-

ment will pay 8%. How much money will she

Interest is a fee paid for the use of someone else’s money.

have at the end of nine months?

If you put money in a savings account, you receive inter-

Step 1: Write the rate as a decimal. 8% = 0.08

est from the bank. If you take out a loan, you pay inter-

Step 2: Express the time as a fraction

est to the lender. The amount of money you invest or

by writing the length of time in months

borrow is called the principal. The amount you repay is

over 12 (the number of months in a year).

the amount of the principal plus the interest.

9

9 months =

1

The formula for simple interest is found on the for-

4

year

2

=

3

Step 3: Multiply. I = prt

mula sheet in the GED. Simple interest is a percent of the

= $4,000 × 0.08 ×

³₄

principal multiplied by the length of the loan:

= $180

Interest = principal × rate × time

Kai will earn $180 in interest.

Sometimes, it may be easier to use the letters of each

P r o b a b i l i t y

as variables:

I = prt

Probability is expressed as a fraction and measures the

likelihood that a specific event will occur. To find the

probability of a specific outcome, use this formula:

Michelle borrows $2,500 from her uncle for

Number of specific outcomesTotal number of possible outcomes

Probability of an event =

three years at 6% simple interest. How much

interest will she pay on the loan?

Step 1: Write the interest as a

decimal. 6% = 0.06

If a bag contains 5 blue marbles, 3 red marbles,

Step 2: Substitute the known

and 6 green marbles, find the probability of

values in the formula I = prt

selecting a red marble:

and multiply. = $2,500 × 0.06 × 3

= $450

Michelle will pay $450 in interest.

3

=

5 +3 + 6

Some problems will ask you to find the amount that

Therefore, the probability of selecting a red

will be paid back from a loan. This adds an additional

marble is

1