2.5 simple interest review

Front

What is simple interest?

Back

Simple interest is a method of calculating the interest charge on a loan or financial product. It is calculated using the formula: Interest = Principal × Rate × Time.

Front

How do you convert a percentage to a decimal?

Back

To convert a percentage to a decimal, divide the percentage by 100. For example, 3% becomes 0.03.

Front

What is the formula for calculating simple interest?

Back

The formula for calculating simple interest is: I = P × r × t, where I is interest, P is principal, r is rate (as a decimal), and t is time (in years).

Front

If the principal is $500 and the interest rate is 4% for 2 years, what is the simple interest?

Back

The simple interest is $40. (I = 500 × 0.04 × 2)

Front

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

Back

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

Front

How do you find the total amount to be paid back on a loan?

Back

To find the total amount to be paid back, add the simple interest to the principal: Total Amount = Principal + Interest.

Front

What is the relationship between time in months and years?

Back

To convert time from months to years, divide the number of months by 12.

Front

If you have a loan of $1,000 at an interest rate of 5% for 3 years, what is the total amount to be paid back?

Back

The total amount to be paid back is $1,150. (Interest = 1000 × 0.05 × 3 = $150; Total = 1000 + 150)

Front

What is the interest earned on a principal of $800 at a rate of 6% over 5 years?

Back

The interest earned is $240. (I = 800 × 0.06 × 5)

Front

What does 'time' refer to in the simple interest formula?

Back

Time refers to the duration for which the money is borrowed or invested, typically measured in years.