Ray's New Higher Arithmetic · Art. 304 · Unit 17: Percentage with Time: Interest
83. Annual interest
Goal: Your student finds the amount due when yearly interest was promised but not paid.
You'll need
- The book
- A slate, small whiteboard or scrap paper
- A notebook and pencil
What's in the book
Annual interest: definition, an explanation with three years of unpaid interest, a worked problem, a rule, a note on Ohio's law, and examples. Answers are printed.
The lesson, step by step
Warm-up
Ask: If you promised to pay $6 interest every year and forgot for two years, is it fair to charge interest on the missed $6? Talk it over.
The idea
Read:
Annual Interest is interest on the principal, and on each annual interest after it is due.
Annual interest is legal in some of the states.
Work the book's example
Find the amount of $10500 for 4 yr. 6 mo., interest 6%, payable annually.
Simple interest for 4½ years: $2835. Each year's interest is $630. The first is late 3½ years, the second 2½, the third 1½, the fourth ½: 8 years in all. Interest on $630 for 8 years at 6% = $302.40. Amount = $10500 + $2835 + $302.40 = $13637.40.
The rule
Read:
Find the interest on the principal for the entire time, and on each year's interest till the time of settlement.
The sum of these interests is the interest required.
Guided practice
Together:
Find the amount of a note for $1500, interest 6%, payable annually, given Sept. 3, 1870, and not paid till March 1, 1874.
Independent practice and check
Your student works the other examples and checks the printed answers.
Wrap-up
Ask: Is annual interest the same as compound interest? (No. The late interest earns simple interest only. It is never added to the principal.)