Algebra 1 H- 3.5 Simple Interest

Front

What is simple interest?

Back

Simple interest is calculated using the formula: I = P * r * t, 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

How do you calculate the total amount to be paid back on a loan with simple interest?

Back

Total Amount = Principal + Interest, where Interest is calculated using the formula I = P * r * t.

Front

What is the principal in the context of simple interest?

Back

The principal is the original amount of money borrowed or invested before interest.

Front

If a loan has a principal of $10,000, an interest rate of 3%, and a time period of 4 years, what is the interest?

Back

Interest = P * r * t = 10,000 * 0.03 * 4 = $1,200.

Front

What is the formula to convert time from months to years?

Back

To convert time from months to years, divide the number of months by 12.

Front

What does the term 'per annum' mean?

Back

'Per annum' means 'per year' and is often used to describe interest rates.

Front

Which type of account typically earns interest?

Back

Savings accounts, investments, and certificates of deposit (CDs) typically earn interest.

Front

What is the difference between simple interest and compound interest?

Back

Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal and also on the accumulated interest from previous periods.

Front

If you invest $5,000 at a simple interest rate of 6% for 3 years, how much interest will you earn?

Back

Interest = P * r * t = 5,000 * 0.06 * 3 = $900.

Front

What is the smallest amount of interest earned among the following options: $8,030 at 2.0% for 2 years, $1,901 at 4.0% for 8 years, $5,330 at 2.0% for 6 years, or $3,970 at 4.0% for 6 years?

Back

$8,030 at 2.0% for 2 years earns the smallest amount of interest.