Understanding Simple Interest Concepts

What is interest?

• expressed as a percentage per year

• the amount of money you earn or pay on a loan based only on the original amount of money borrowed (called the principal), the interest rate, and the time period, where the interest is calculated on the original amount each time, not on any accumulated interest

• is the original amount of money borrowed or invested

• Time of the term

What does I stand for in the simple interest formula?

• Time in years

• Rate as a decimal

• Principal

• Interest

What does r stand for in the simple interest formula?

• Time in years

• Rate as a decimal

• Principal

• Interest

What does t stand for in the simple interest formula?

• Time in years

• Rate as a decimal

• Principal

• Interest

What does P stand for in the simple interest formula?

• Time in years

• Rate as a decimal

• Principal

• Interest

What is the Principal in the simple interest formula?

• the extra amount of money you earn when you invest money or the extra amount you pay when you borrow money, usually calculated as a percentage of the original amount (called the principal) over a specific period of time

• refers to the original amount of money borrowed or invested

• and is expressed as a percentage

• refers to the length of time (usually measured in years) that money is invested or borrowed

What is the time in the simple interest formula?

• the extra amount of money you earn when you invest money or the extra amount you pay when you borrow money, usually calculated as a percentage of the original amount (called the principal) over a specific period of time

• refers to the original amount of money borrowed or invested

• expressed as a percentage

• refers to the length of time (usually measured in years) that money is invested or borrowed

What is the rate in the simple interest formula?

• the extra amount of money you earn when you invest money or the extra amount you pay when you borrow money, usually calculated as a percentage of the original amount (called the principal) over a specific period of time

• refers to the original amount of money borrowed or invested

• is expressed as a percentage

• refers to the length of time (usually measured in years) that money is invested or borrowed

What is the interest in the simple interest formula?

• the extra amount of money you earn when you invest money or the extra amount you pay when you borrow money, usually calculated as a percentage of the original amount (called the principal) over a specific period of time

• refers to the original amount of money borrowed or invested

• expressed as a percentage

• refers to the length of time (usually measured in years) that money is invested or borrowed

If you deposit $200 in a savings account that earns 3% interest per year, how much interest will you earn after 5 years?

What is the rate you would use for the simple interest formula?

• 3

• 0.3

• 0.03

• 30