Simple and Compound Interest Word Problems

The simple interest formula is I=Prt. The P represents the principle. The principle is ___________________.

• the amount of money borrowed or deposited

• the percent interest for his year

• the amount taxed

• the amount the bank owes you for being a customer at their bank

Jerry borrowed $4,000 for 5 years at 6% simple interest rate. How much interest is that?

• $800
• $1,000
• $1,200
• $1,500

Julie borrowed $3,500 for 3 years at 7½% simple interest rate. 
How much interest is that?

• Julie borrowed $3,500 for 3 years at 7½% simple interest rate. 
  How much interest is that?
• $787.50
• $810
• $812.50

Ann puts $300 in a bank account earning 4% interest.  How much will she earn in interest in 1 year?

• 4
• 8
• 12
• 16

Emilio borrows $1200 from a bank with 8% simple interest per year.  How much will he have to pay back total in 2 years?

• 150
• 192
• 1350
• 1392

The simple interest formula is I=Prt. What does the t represent?

• Principle

• Interest

• Time

• Percent Rate

If you are calculating the simple interest and you are given the time in months. How can you find the time in years?

• divide 12 by the months

• divide the months by 12

• multiply 12 times the months

• change the months to a decimal

Principal = $800
Interest Rate = 3.5%
Time = 6 months
Find the interest earned.

• 14
• 140
• 168
• 16.80

You lend $240 to your friend. He pays you back $30 in interest in one year. What interest rate did you charge your friend?

• 88%

• 20%

• 12.5%

• 10%

The rate is given as a percent (%).  Before using it in the simple interest formula, you must first convert it to a______.

• fraction
• decimal
• ratio
• dollar amount