Simple Interest

Front

What is Simple Interest?

Back

Simple Interest is a method of calculating the interest charged or earned on a principal amount over a specific period of time, typically expressed as a percentage.

Front

What is the formula for calculating Simple Interest?

Back

The formula for Simple Interest is: I = P * r * 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 5% simple interest rate for 3 years, how much interest will you earn?

Back

I = P * r * t = 1000 * 0.05 * 3 = $150.

Front

What is the principal amount in a loan?

Back

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

Front

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

Back

Total Amount = Principal + Interest.

Front

If a loan of $2,000 has a simple interest rate of 4% for 5 years, what is the total amount to be paid back?

Back

I = P * r * t = 2000 * 0.04 * 5 = $400. Total Amount = 2000 + 400 = $2400.

Front

What does it mean to double your investment with simple interest?

Back

To double your investment means to have the total amount (principal + interest) equal to twice the principal amount.

Front

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

Back

Using the formula: t = (2P - P) / (P * r) = P / (P * r) = 1 / r = 1 / 0.10 = 10 years.

Front

What is the impact of a higher interest rate on simple interest?

Back

A higher interest rate increases the amount of interest earned or paid over the same period of time.

Front

If you earn $200 in interest on a $1,000 investment at a simple interest rate, what is the rate?

Back

Using the formula: r = I / (P * t). If t = 1 year, r = 200 / (1000 * 1) = 0.20 or 20%.