Simple Interest

Front

What is Simple Interest?

Back

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

Front

What is the formula for calculating Simple Interest?

Back

The formula for Simple Interest is: I = P × r × t, 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 the principal is $800, the interest is $14, and the time is 6 months, how do you find the interest rate?

Back

Convert time to years (6 months = 0.5 years). Use the formula: r = I / (P × t). Here, r = 14 / (800 × 0.5) = 0.035 or 3.5%.

Front

How do you convert months into years when calculating Simple Interest?

Back

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

Front

What is the total amount accumulated after 4 years if $2,000 is invested at a 5% simple interest rate?

Back

Total Amount = Principal + Interest. First, calculate Interest: I = 2000 × 0.05 × 4 = $400. Total Amount = 2000 + 400 = $2400.

Front

If Ann earned $12 in interest from a $300 investment at 4% interest, how long was the investment?

Back

Using the formula I = P × r × t, rearranging gives t = I / (P × r). Here, t = 12 / (300 × 0.04) = 1 year.

Front

What must you do to the interest rate before using it in the Simple Interest formula?

Back

You must convert the interest rate from a percentage to a decimal.

Front

What is the interest earned on a principal of $1,000 at a rate of 6% for 3 years?

Back

Using the formula I = P × r × t, I = 1000 × 0.06 × 3 = $180.

Front

If you have a principal of $500 and want to earn $50 in interest, what interest rate is needed for 2 years?

Back

Using the formula r = I / (P × t), r = 50 / (500 × 2) = 0.05 or 5%.

Front

What is the principal if the interest earned is $30 at a rate of 5% over 2 years?

Back

Using the formula P = I / (r × t), P = 30 / (0.05 × 2) = $300.