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 I = P * r * t, where I is the interest, P is the principal, r is the rate of interest, and t is the time in years.

Front

What is the formula for calculating Simple Interest?

Back

The formula for calculating Simple Interest is I = P * r * t.

Front

In the formula I = P * r * t, what does 'P' represent?

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'P' represents the principal amount, which is the initial sum of money deposited or borrowed.

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In the formula I = P * r * t, what does 'r' represent?

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'r' represents the rate of interest, expressed as a decimal.

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In the formula I = P * r * t, what does 't' represent?

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't' represents the time the money is invested or borrowed for, measured in years.

Front

How do you convert a percentage to a decimal?

Back

To convert a percentage to a decimal, divide the percentage by 100. For example, 8.25% becomes 0.0825.

Front

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

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You will earn $150 in interest. (I = 1000 * 0.05 * 3 = 150)

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What will be the total amount in the account after earning simple interest?

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The total amount will be the principal plus the interest earned. For example, if the principal is $1,000 and the interest is $150, the total will be $1,150.

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If you earned $600 in interest on a principal of $10,000 at a rate of 5%, how long did the investment last?

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The investment lasted for 12 years. (t = I / (P * r) = 600 / (10000 * 0.05) = 12)

Front

What is the balance in an account after 18 years if $1,500 is deposited at an 8.25% simple interest rate?

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The balance will be $3,727.50 after 18 years.