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 per year, and T is the time in years.

Front

What does the 'P' in the formula I = P * R * T stand for?

Back

'P' stands for Principal, which is the initial amount of money invested or borrowed before interest.

Front

What does the 'R' in the formula I = P * R * T represent?

Back

'R' represents the Rate of interest, expressed as a percentage.

Front

What does the 'T' in the formula I = P * R * T indicate?

Back

'T' indicates the Time period for which the money is invested or borrowed, measured in years.

Front

How do you calculate Simple Interest?

Back

Simple Interest is calculated using the formula I = P * R * T.

Front

If Ike invests $7,660 at 7.27% for 4 years, how much interest does he earn?

Back

I = 7660 * 0.0727 * 4 = $2,227.53.

Front

If Trevor paid $6,774.50 in interest at 2.7% over 22 years, how do you find the principal?

Back

Use the formula P = I / (R * T). Here, P = 6774.50 / (0.027 * 22) = $11,404.88.

Front

What is the meaning of 'per annum'?

Back

'Per annum' means 'per year'.

Front

Which of the following does not earn interest: an investment, a loan, a savings account, or a CD?

Back

A loan does not earn interest; it is the amount borrowed that incurs interest.

Front

What is the difference between Simple Interest and Compound Interest?

Back

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