Simple Interest Problems

 What is simple interest?

• The original amount you invested or borrowed.

• The total amount you invested or borrowed.

• The money that you either earn or owe on top of the original amount you invested or borrowed.

• The money you receive from friends as a gift for investing or borrowing.

Answer explanation

Simple interest is a basic way of calculating the extra money you'll earn on an investment or owe on a loan. It's called "simple" because it's only based on the original amount you put in or borrowed, without considering any previous interest. Understanding simple interest allows you to make informed financial decisions, compare loan offers, and estimate investment earnings.

Tags

CCSS.7.RP.A.3

Michael took out a personal loan of $5,000 from a bank at an interest rate of 6.25% per year. If he plans to repay the loan in 18 months, what will be the total amount he needs to repay?

• $5,400

• $5,468.75

• $5,300

• $5,120.25

Answer explanation

To find the total amount to repay, you need to calculate the simple interest. The formula for simple interest is: Interest = Principal × rate × time. The principal borrowed is $5,000. The interest rate is given as 6.25%. To use the formula, you need to convert it to a decimal by dividing it by 100: 6.25% ÷ 100 = 0.0625. The time is 18 months. Since the time is in months, you need to convert it to years by dividing it by 12: 18 months ÷ 12 months = 1.5 years. Substitute the values into the formula: Interest = $5,000 × 0.0625 × 1.5 = $468.75; Total amount to repay = Principal + Interest = $5,000 + $468.75 = $5,468.75.

Tags

CCSS.7.RP.A.3

Sarah invested $3,000 in a high-yield savings account with an annual interest rate of 2.5%. If she keeps the money in the account for 5 years, how much will she have at the end of the 5-year period?

• $3,750.25

• $3,875

• $3,875.50

• $3,375

Answer explanation

To find the total amount after 5 years, you need to calculate the simple interest earned. The formula for simple interest is: Interest = Principal × rate × time. The principal invested is $3,000. The interest rate is given as 2.5%. To use the formula, you need to convert it to a decimal by dividing it by 100: 2.5% ÷ 100 = 0.025. The time is 5 years. Substitute the values into the formula: Interest = $3,000 × 0.025 × 5 = $375; Total amount = Principal + Interest = $3,000 + $375 = $3,375.

Tags

CCSS.7.RP.A.3

Jennifer borrowed $2,500 from her friend at an annual interest rate of 3.5%. If she plans to repay the loan in 3 years, what will be the total amount she needs to repay?

• $2,465.25

• $2,725

• $2,762.50

• $2,775

Answer explanation

To find the total amount to repay, you need to calculate the simple interest. The formula for simple interest is: Interest = Principal × rate × time. The principal borrowed is $2,500. The interest rate is given as 3.5%. To use the formula, you need to convert it to a decimal by dividing it by 100: 3.5% ÷ 100 = 0.035. The time is 3 years. Substitute the values into the formula: Interest = $2,500 × 0.035 × 3 = $262.50; Total amount to repay = Principal + Interest = $2,500 + $262.50 = $2,762.50.

Tags

CCSS.7.RP.A.3

John invested $1,400 in a stock market fund with an annual return of 8.5%. If he keeps the money in the fund for 9 months, how much will he have at the end of the 9-month period?

• $1,489.25

• $1,340

• $1,284.50

• $1,263

Answer explanation

To find the total amount after 9 months, you need to calculate the simple interest earned. The formula for simple interest is: Interest = Principal × rate × time. The principal invested is $1,400. The interest rate is given as 8.5%. To use the formula, you need to convert it to a decimal by dividing it by 100: 8.5% ÷ 100 = 0.085. The time is 9 months. Since the time is in months, you need to convert it to years by dividing it by 12: 9 months ÷ 12 months = 0.75 years. Substitute the values into the formula: Interest = $1,400 × 0.085 × 0.75 = $89.25; Total amount = Principal + Interest = $1,400 + $89.25 = $1,489.25.

Tags

CCSS.7.RP.A.3