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 x Rate x Time.

Front

What is the formula for calculating Simple Interest?

Back

The formula for Simple Interest is: I = P x r x 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 borrow $1,000 at a simple interest rate of 5% for 3 years, how much interest will you pay?

Back

Interest = 1000 x 0.05 x 3 = $150.

Front

What is the total amount to be paid back if you borrow $2,000 at a simple interest rate of 4% for 5 years?

Back

Total Amount = Principal + Interest = 2000 + (2000 x 0.04 x 5) = $2,400.

Front

How do you calculate the total amount paid back on a loan with simple interest?

Back

Total Amount = Principal + Interest, where Interest is calculated using the formula I = P x r x t.

Front

What is the difference between Simple Interest and Compound Interest?

Back

Simple Interest is calculated only on the principal amount, while Compound Interest is calculated on the principal plus any interest that has already been added.

Front

If a bank offers a simple interest rate of 6% per year, how much interest will you earn on a $1,500 deposit after 4 years?

Back

Interest = 1500 x 0.06 x 4 = $360.

Front

What is the principal amount in a simple interest loan?

Back

The principal amount is the initial sum of money borrowed or invested, before any interest is added.

Front

How does the time period affect the amount of simple interest earned or paid?

Back

The longer the time period, the more interest will be earned or paid, as interest is calculated for each year.

Front

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

Back

A higher interest rate increases the amount of interest paid over the life of the loan.