Simple Interest

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What is Simple Interest?

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Simple Interest is the interest calculated on the principal amount only, without compounding. It is calculated using the formula: I = PRT, where I is interest, P is principal, R is rate, and T is time.

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What does the 'P' in the interest formula stand for?

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P stands for Principal, which is the initial amount of money deposited or borrowed.

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What does the 'R' in the interest formula stand for?

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R stands for Rate, which is the percentage of interest charged or earned on the principal.

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What does the 'T' in the interest formula stand for?

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T stands for Time, which is the duration for which the money is deposited or borrowed, usually expressed in years.

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How do you convert years to months?

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To convert years to months, multiply the number of years by 12.

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How do you convert months to years?

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

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

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You will earn $150 in interest. (I = PRT = 1000 * 0.05 * 3 = 150)

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If you earn $200 in interest from a principal of $1,000 over 4 years, what is the interest rate?

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The interest rate is 5%. (R = I / (PT) = 200 / (1000 * 4) = 0.05 or 5%)

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What is the formula for calculating Simple Interest?

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The formula for calculating Simple Interest is I = PRT.

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True or False: Simple Interest can be calculated on the interest earned in previous periods.

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False. Simple Interest is calculated only on the principal amount.