Simple Interest

Front

What is simple interest?

Back

Simple interest is a method of calculating the interest charge on a loan or the interest earned on an investment based on the principal amount, the interest rate, and the time period.

Front

How is simple interest calculated?

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 annual interest rate (in decimal), and t is the time in years.

Front

What is the principal amount in a loan or investment?

Back

The principal amount is the initial sum of money borrowed or invested, before any interest is added.

Front

If a principal amount of $1,000 is invested at a 5% simple interest rate for 3 years, how much interest will be earned?

Back

The interest earned will be $150, calculated as I = 1000 * 0.05 * 3.

Front

What does the term 'interest rate' refer to?

Back

The interest rate is the percentage of the principal charged as interest for a specific period, usually expressed on an annual basis.

Front

How long will it take to double an investment at a simple interest rate of 10%?

Back

It will take 10 years to double the investment, as the interest earned each year is 10% of the principal.

Front

What is the total amount paid back on a loan?

Back

The total amount paid back on a loan is the sum of the principal and the interest accrued over the loan period.

Front

If a person earns $200 in interest at a 4% simple interest rate, what was the principal amount if the money was invested for 5 years?

Back

The principal amount was $1,000, calculated using the formula P = I / (r * t) = 200 / (0.04 * 5).

Front

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

Back

In simple interest calculations, the interest earned is directly proportional to the time the money is invested or borrowed.

Front

How does changing the interest rate affect the total interest earned?

Back

Increasing the interest rate will increase the total interest earned, while decreasing the interest rate will reduce the total interest earned.