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.

Front

What does the variable 'P' represent in the simple interest formula I = P * r * t?

Back

'P' represents the Principal amount, which is the initial sum of money borrowed or invested.

Front

What does the variable 'r' represent in the simple interest formula I = P * r * t?

Back

'r' represents the annual interest rate, expressed as a decimal.

Front

What does the variable 't' represent in the simple interest formula I = P * r * t?

Back

't' represents the time the money is borrowed or invested, measured in years.

Front

Calculate the simple interest for a principal of $1,000 at an interest rate of 5% for 3 years.

Back

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

Front

If you borrow $2,000 at a simple interest rate of 4% for 4 years, how much total will you pay back?

Back

Total Payback = Principal + Interest = 2000 + (2000 * 0.04 * 4) = $2,320.

Front

What is the formula to calculate the total amount to be paid back when borrowing money?

Back

Total Amount = Principal + Interest = P + (P * r * t).

Front

If the principal is $500 and the interest earned is $125, what is the interest rate if the time is 5 years?

Back

Using I = P * r * t, we have 125 = 500 * r * 5. Therefore, r = 0.05 or 5%.

Front

What is the ending balance if you invest $10,000 at a simple interest rate of 6% for 2 years?

Back

Ending Balance = Principal + Interest = 10000 + (10000 * 0.06 * 2) = $12,000.

Front

How much interest will you earn on $3,000 at a simple interest rate of 7% over 1 year?

Back

I = P * r * t = 3000 * 0.07 * 1 = $210.