3.6 Simple Interest Problems

Front

What is Simple Interest?

Back

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

Front

What is the formula for calculating Simple Interest?

Back

The formula for calculating Simple Interest is: SI = P × R × T, where SI is Simple Interest, P is Principal, R is Rate (as a decimal), and T is Time (in years).

Front

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

Back

You will earn $150 in interest. (SI = 1000 × 0.05 × 3 = $150)

Front

What is the principal amount if the simple interest earned in 4 years at a rate of 2% is $80?

Back

The principal amount is $1,000. (P = SI / (R × T) = 80 / (0.02 × 4))

Front

How do you convert a percentage rate to a decimal for calculations?

Back

To convert a percentage to a decimal, divide the percentage by 100. For example, 8% becomes 0.08.

Front

What is the total amount to be paid back if you borrow $500 at a 6% simple interest rate for 5 years?

Back

The total amount to be paid back is $630. (Total = Principal + Interest = 500 + (500 × 0.06 × 5))

Front

How do you find the interest rate if you know the principal, interest earned, and time?

Back

You can find the interest rate using the formula: R = SI / (P × T).

Front

If you have a principal of $2,000 and earn $400 in interest over 2 years, what is the simple interest rate?

Back

The simple interest rate is 10%. (R = 400 / (2000 × 2) = 0.10 or 10%)

Front

What is the total amount after 6 years if you invest $1,500 at a 4% simple interest rate?

Back

The total amount after 6 years is $1,800. (Total = 1500 + (1500 × 0.04 × 6))

Front

How much interest is earned on a principal of $800 at a rate of 3% for 10 months?

Back

The interest earned is $20. (SI = 800 × 0.03 × (10/12) = $20)