Simple Interest

Front

What is Simple Interest?

Back

Simple Interest is the interest calculated on the principal amount only, without compounding. It is given by 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 formula I = P * r * t represent?

Back

This formula represents the calculation of Simple Interest, where I is the interest earned, P is the principal amount, r is the annual interest rate (in decimal), and t is the time in years.

Front

If the principal is $1,000, the interest rate is 5%, and the time is 3 years, what is the interest?

Back

$150. (I = 1000 * 0.05 * 3 = 150)

Front

What is the principal in the context of Simple Interest?

Back

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

Front

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

Back

To convert a percentage to a decimal, divide the percentage by 100. For example, 5% becomes 0.05.

Front

Calculate the total amount after 2 years if the principal is $2,000 at an interest rate of 4%.

Back

$2,160. (Total Amount = Principal + Interest = 2000 + (2000 * 0.04 * 2) = 2160)

Front

What does the 't' in the interest formula stand for?

Back

The 't' stands for time, which is the duration for which the money is borrowed or invested, measured in years.

Front

If you earn $200 in interest on a principal of $1,000 over 4 years, what is the interest rate?

Back

5%. (I = P * r * t; 200 = 1000 * r * 4; r = 200 / (1000 * 4) = 0.05 or 5%)

Front

What is the total amount if the principal is $500, the interest rate is 10%, and the time is 5 years?

Back

$1,000. (Total Amount = 500 + (500 * 0.10 * 5) = 1000)

Front

What is the interest earned on a loan of $3,000 at a rate of 3% for 6 years?

Back

$540. (I = 3000 * 0.03 * 6 = 540)