Understanding Simple Interest Concepts

Front

What does PMT stand for in the annuity formula?

Back

Regular payments

Front

This formula is to calculate...

Back

The final amount including the principal value and the simple interest

Front

What does the r stand for in the simple interest equation?

Back

Rate (% as decimal)

Front

What does the P stand for in the simple interest equation?

Back

Principal

Front

What does the t stand for in the simple interest equation?

Back

Time

Front

What is the formula for calculating simple interest?

Back

Simple Interest (SI) = Principal (P) × Rate (r) × Time (t)

Front

If you invest $1000 at a rate of 5% for 3 years, what is the simple interest earned?

Back

Simple Interest = $1000 × 0.05 × 3 = $150

Front

What is the total amount after earning simple interest?

Back

Total Amount = Principal + Simple Interest

Front

How does simple interest differ from compound interest?

Back

Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus any interest earned.

Front

What is the importance of the rate in the simple interest formula?

Back

The rate determines how much interest is earned over time; a higher rate results in more interest.