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 borrow $1,000 at a 5% simple interest rate for 3 years, how much interest will you pay?

Back

Interest = $1,000 × 0.05 × 3 = $150.

Front

How do you calculate the total amount to be paid back on a loan with Simple Interest?

Back

Total Amount = Principal + Interest.

Front

What is the principal in a Simple Interest calculation?

Back

The principal is the initial amount of money borrowed or invested before interest.

Front

What does the rate in Simple Interest represent?

Back

The rate represents the percentage of interest charged or earned on the principal amount, usually expressed annually.

Front

How long will it take to double an investment with a 10% simple interest rate?

Back

It will take 10 years to double the investment, as you earn 10% of the principal each year.

Front

If you invest $500 at a 4% simple interest rate, how much interest will you earn in 5 years?

Back

Interest = $500 × 0.04 × 5 = $100.

Front

What is the total amount after 5 years if you invest $600 at a 5% simple interest rate?

Back

Total Amount = Principal + Interest = $600 + ($600 × 0.05 × 5) = $600 + $150 = $750.

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 been added to it.