Simple Interest

Front

What is Simple Interest?

Back

Simple Interest is a method of calculating the interest charge on a loan or financial product. 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 per year, and t is the time in years.

Front

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

Back

Interest = 1000 × 0.05 × 3 = $150.

Front

What is the total amount after earning simple interest?

Back

Total Amount = Principal + Interest.

Front

If you borrow $500 at a simple interest rate of 10% for 2 years, how much will you owe in total?

Back

Interest = 500 × 0.10 × 2 = $100. Total Amount = 500 + 100 = $600.

Front

How does the time period affect simple interest?

Back

The longer the time period, the more interest will accumulate, as interest is calculated based on the principal amount over time.

Front

What is the impact of a higher interest rate on simple interest?

Back

A higher interest rate results in more interest earned or paid over the same time period.

Front

If a loan of $1,200 is taken at a simple interest rate of 6% for 4 years, what is the interest paid?

Back

Interest = 1200 × 0.06 × 4 = $288.

Front

What is the balance in an account after 10 years if $2,000 is invested at a simple interest rate of 4%?

Back

Interest = 2000 × 0.04 × 10 = $800. Total Amount = 2000 + 800 = $2800.

Front

What is the principal amount if the interest earned is $150 at a rate of 5% over 3 years?

Back

Using the formula I = P × r × t, we can rearrange to find P: P = I / (r × t) = 150 / (0.05 × 3) = $1000.