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 I = PRT, where I is the interest, P is the principal, R is the rate of interest per year, and T is the time in years.

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 (in decimal), and T is the time (in years).

Front

If you invest $1,000 at an interest rate of 5% for 3 years, how much interest will you earn?

Back

I = PRT = 1000 * 0.05 * 3 = $150.

Front

What does 'Principal' mean in the context of Simple Interest?

Back

Principal is the initial amount of money that is invested or loaned, before any interest is added.

Front

How do you convert a percentage 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 is the relationship between time and interest earned in Simple Interest?

Back

In Simple Interest, the longer the time period, the more interest is earned, as interest is directly proportional to time.

Front

If the interest earned is $200 on a principal of $1,000 at a rate of 4%, how long was the money invested?

Back

Using I = PRT, we rearrange to find T: T = I / (PR) = 200 / (1000 * 0.04) = 5 years.

Front

What is the effect of increasing the interest rate on Simple Interest?

Back

Increasing the interest rate will increase the amount of interest earned, as interest is directly proportional to the rate.

Front

If you want to earn $300 in interest from a $2,000 investment at a rate of 6%, how long will you need to invest it?

Back

Using I = PRT, T = I / (PR) = 300 / (2000 * 0.06) = 2.5 years.

Front

What is the total amount after earning Simple Interest?

Back

The total amount after earning Simple Interest is the sum of the principal and the interest earned: Total Amount = Principal + Interest.