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 × Rate × Time.

Front

What is the formula for calculating Simple Interest?

Back

The formula for calculating 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 (in decimal), and t is the time in years.

Front

If Maria borrowed $3,000 at a simple interest rate of 4% per year, how much interest will she pay after 4 years?

Back

Interest = Principal × Rate × Time = $3,000 × 0.04 × 4 = $480.

Front

How much will Maria have to repay after 4 years if she borrowed $3,000 at 4% simple interest?

Back

Total repayment = Principal + Interest = $3,000 + $480 = $3,480.

Front

What is the interest earned on a $4,500 savings account that earns 2.5% simple interest over three years?

Back

Interest = Principal × Rate × Time = $4,500 × 0.025 × 3 = $337.50.

Front

Calculate the simple interest earned on $2,000 at a rate of 4.6% over 4 years.

Back

Interest = $2,000 × 0.046 × 4 = $368.

Front

If Mark borrows $20,000, which loan option will cost him the least amount of money?

Back

The loan with 4.75% simple interest for 3.5 years will cost him the least.

Front

What is the best loan option if you need to borrow $1,000?

Back

The best option is 6% simple interest for 2 years.

Front

What does 'Principal' mean in the context of simple interest?

Back

Principal is the initial amount of money borrowed or invested, before interest.

Front

What does 'Rate' refer to in the simple interest formula?

Back

Rate refers to the percentage of interest charged or earned on the principal amount, expressed as a decimal.