Calculating Simple Interest: Principal, Rate, and Time

This video tutorial explains the concept of simple interest, a method for calculating returns on investments or interest charges on loans. It covers the basic formulae for simple interest, how to find the principal, interest rate, and time using these formulae, and provides several examples to illustrate these calculations. The video also discusses converting interest rates to decimals and rearranging formulae for different variables.

What is simple interest primarily used for in finance?

• Estimating stock market profits

• Forecasting economic growth

• Determining return on investment or loan interest

• Calculating compound returns

Which mathematical operation is initially used to rearrange the simple interest formula to find the principal?

• Subtraction

• Addition

• Division

• Multiplication

In the example, if $1600 interest was earned over 4 years at 8% per annum, what was the principal amount invested?

• $5000

• $3200

• $2000

• $8000

How do you convert a monthly interest rate to an annual rate?

• Divide by 12

• Multiply by 6

• Multiply by 12

• Divide by 6

What is the principal if $3900 interest was earned in 5 years at a rate of 6.5% per annum?

• $12000

• $10000

• $15000

• $6000

How is the interest rate found if the total interest and principal are known?

• Multiply principal by interest

• Divide interest by principal and multiply by 100

• Subtract interest from principal

• Add interest to principal

What was the annual interest rate for a loan of $1860 with total payments of $2139 over 2.5 years?

• 8%

• 10%

• 12%

• 6%

If $552 was earned over 5 years on a principal of $2400, what was the annual interest rate?

• 6.5%

• 4.6%

• 3.5%

• 5.5%

For an investment of $16,000 at 8.5% per annum, how long would it take to earn $4760 in interest?

• 5 years

• 2.5 years

• 4 years

• 3.5 years

What is the key takeaway from the video on simple interest?

• Understanding compound interest

• Using algebra to manipulate financial formulas

• Predicting financial markets

• Using simple interest formulas confidently