Simple Interest

Front

What is Simple Interest?

Back

Simple Interest is the interest calculated on the principal amount only, without compounding. It is given by the formula: Simple Interest = Principal × Rate × Time.

Front

What is the formula for calculating Simple Interest?

Back

The formula for calculating Simple Interest is: SI = P × R × T, where SI is Simple Interest, P is the principal amount, R is the rate of interest (in decimal), and T is the time (in years).

Front

How do you convert months into years for Simple Interest calculations?

Back

To convert months into years, divide the number of months by 12. For example, 15 months = 15/12 = 1.25 years.

Front

If the principal is $1,500, the rate is 19%, and the time is 15 months, what is the Simple Interest?

Back

Simple Interest = 1500 × 0.19 × (15/12) = $356.25.

Front

What is the principal amount in a Simple Interest problem?

Back

The principal amount is the initial sum of money borrowed or invested before interest is applied.

Front

What does the rate in Simple Interest represent?

Back

The rate in Simple Interest represents the percentage of the principal that is paid as interest over a specific time period.

Front

How do you calculate the interest earned on a deposit of $225 at a rate of 1.5% over 2 years?

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Simple Interest = 225 × 0.015 × 2 = $6.75.

Front

What is the time period in years if you have 8 months?

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The time period in years is 8/12 = 0.67 years.

Front

When calculating Simple Interest, why is it important to convert the rate to a decimal?

Back

It is important to convert the rate to a decimal to ensure accurate calculations. For example, 10% becomes 0.10.

Front

If you invest $8,000 at a rate of 9% for 18 years, how much interest will you earn?

Back

Simple Interest = 8000 × 0.09 × 18 = $12,960.