Simple Interest

Front

What is Simple Interest?

Back

Simple Interest is a method of calculating the interest charge on a loan or the interest earned on an investment based on the principal amount, the interest rate, and the time period.

Front

What is the formula for calculating Simple Interest?

Back

The formula for Simple Interest is: I = P * r * t, where I is the interest, P is the principal amount, r is the rate of interest per year (in decimal), and t is the time in years.

Front

If you invest $1,000 at a 5% simple interest rate, how much interest will you earn in 4 years?

Back

You will earn $200 in interest. (I = 1000 * 0.05 * 4 = 200)

Front

How long will it take to double an investment at a 10% simple interest rate?

Back

It will take 10 years to double the investment. (Using the formula: 2P = P + (P * r * t), solving gives t = 10 years.)

Front

What is the principal amount if you earned $150 in interest at a 3% simple interest rate over 5 years?

Back

The principal amount is $1,000. (Using the formula: P = I / (r * t) = 150 / (0.03 * 5) = 1000)

Front

What does the term 'principal' mean in the context of simple interest?

Back

Principal refers to the initial amount of money that is either invested or borrowed before any interest is added.

Front

If you borrow $2,000 at a 6% simple interest rate for 3 years, how much total will you pay back?

Back

You will pay back $2,360. (Interest = 2000 * 0.06 * 3 = 360; Total = Principal + Interest = 2000 + 360 = 2360)

Front

What is the difference between simple interest and compound interest?

Back

Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus any interest that has already been added.

Front

How much interest will you earn on $500 at a 4% simple interest rate after 10 years?

Back

You will earn $200 in interest. (I = 500 * 0.04 * 10 = 200)

Front

If you have an account that earns 2% simple interest and you want to earn $100 in interest, how much do you need to deposit for 5 years?

Back

You need to deposit $1,000. (Using the formula: P = I / (r * t) = 100 / (0.02 * 5) = 1000)