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

Back

Interest = 1000 x 0.05 x 3 = $150.

Front

What is the principal amount in a simple interest calculation?

Back

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

Front

How do you find the total amount to be paid back on a loan with simple interest?

Back

Total Amount = Principal + Interest.

Front

If a loan has a principal of $2,000, an interest rate of 4%, and a time period of 5 years, what is the total amount to be paid back?

Back

Interest = 2000 x 0.04 x 5 = $400. Total Amount = 2000 + 400 = $2400.

Front

What does the term 'rate' refer to in simple interest?

Back

The 'rate' refers to the percentage of the principal charged as interest for a specific period, usually expressed annually.

Front

How long will it take to double an investment of $500 at a simple interest rate of 10%?

Back

Time = Principal / (Rate x Principal) = 500 / (0.10 x 500) = 10 years.

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 you earn $200 in interest on a principal of $1,000 at a simple interest rate of 5%, how long did you invest the money?

Back

Time = Interest / (Principal x Rate) = 200 / (1000 x 0.05) = 4 years.