Learn on PengiPengi Math (Grade 7)Chapter 4: Percents and Financial Applications

Lesson 5: Simple Interest and Commission

Property If an amount of money, $P$, the principal, is invested for a period of $t$ years at an annual interest rate $r$, the amount of interest, $I$, earned is $$I = Prt$$ where $I$ = interest $P$ = principal $r$ = rate $t$ = time.

Section 1

Use the simple interest formula

Property

If an amount of money, PP, the principal, is invested for a period of tt years at an annual interest rate rr, the amount of interest, II, earned is

I=PrtI = Prt

where

  • II = interest
  • PP = principal
  • rr = rate
  • tt = time

Interest earned according to this formula is called simple interest.

Examples

  • To find the interest earned on 1,200 dollars at a 3% rate for 5 years, calculate I=(1200)(0.03)(5)I = (1200)(0.03)(5), which equals 180 dollars.

Section 2

Commission

Property

A commission is a percentage of total sales as determined by the rate of commission.

commission=rate of commission⋅total sales\text{commission} = \text{rate of commission} \cdot \text{total sales}

Examples

  • A real estate agent sells a house for 350,000 dollars and earns a 3% commission. Her commission is 0.03⋅350000=105000.03 \cdot 350000 = 10500 dollars.

Lesson overview

Expand to review the lesson summary and core properties.

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Section 1

Use the simple interest formula

Property

If an amount of money, PP, the principal, is invested for a period of tt years at an annual interest rate rr, the amount of interest, II, earned is

I=PrtI = Prt

where

  • II = interest
  • PP = principal
  • rr = rate
  • tt = time

Interest earned according to this formula is called simple interest.

Examples

  • To find the interest earned on 1,200 dollars at a 3% rate for 5 years, calculate I=(1200)(0.03)(5)I = (1200)(0.03)(5), which equals 180 dollars.

Section 2

Commission

Property

A commission is a percentage of total sales as determined by the rate of commission.

commission=rate of commission⋅total sales\text{commission} = \text{rate of commission} \cdot \text{total sales}

Examples

  • A real estate agent sells a house for 350,000 dollars and earns a 3% commission. Her commission is 0.03⋅350000=105000.03 \cdot 350000 = 10500 dollars.