Simple Interest

Front

What is the formula for calculating simple interest?

Back

The formula for calculating simple interest is I = PRT, where I is the interest, P is the principal amount, R is the rate of interest per year, and T is the time in years.

Front

If you invest $500 at a simple interest rate of 4% for 5 years, how much interest will you earn?

Back

You will earn $100 in interest. (I = 500 * 0.04 * 5 = 100)

Front

What is the total amount (principal + interest) after earning simple interest?

Back

The total amount is calculated as A = P + I, where A is the total amount, P is the principal, and I is the interest earned.

Front

How do you convert a percentage interest rate to a decimal for calculations?

Back

To convert a percentage to a decimal, divide the percentage by 100. For example, 5% becomes 0.05.

Front

What does 'principal' mean in the context of simple interest?

Back

Principal refers to the initial amount of money that is invested or borrowed before any interest is applied.

Front

If a loan of $1,000 is taken at a simple interest rate of 6% for 3 years, what is the total amount to be paid back?

Back

The total amount to be paid back is $1,180. (Interest = 1000 * 0.06 * 3 = 180; Total = 1000 + 180 = 1180)

Front

What is the relationship between principal, interest, and time in simple interest calculations?

Back

In simple interest calculations, the interest earned is directly proportional to the principal amount and the time period for which the money is invested or borrowed.

Front

How do you calculate the total balance on an account after a certain period with simple interest?

Back

To calculate the total balance, use the formula A = P + I, where I is calculated using I = PRT.

Front

What is the effect of increasing the interest rate on the total interest earned?

Back

Increasing the interest rate will increase the total interest earned, assuming the principal and time remain constant.

Front

If you have a principal of $800 and earn $120 in interest over 4 years, what is the interest rate?

Back

The interest rate is 3.75%. (I = PRT; 120 = 800 * R * 4; R = 120 / (800 * 4) = 0.0375 or 3.75%)