Simple Interest

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What is Simple Interest?

Back

Simple Interest is the interest calculated on the principal amount only, without compounding. It can be calculated using the formula I = PRT, where I is the interest, P is the principal, R is the rate of interest, and T is the time in years.

Front

What is the formula for calculating Simple Interest?

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The formula for calculating Simple Interest is I = PRT.

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In the formula I = PRT, what does P stand for?

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P stands for the principal amount, which is the initial sum of money borrowed or invested.

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In the formula I = PRT, what does R stand for?

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R stands for the rate of interest, expressed as a decimal.

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In the formula I = PRT, what does T stand for?

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T stands for the time period in years for which the money is borrowed or invested.

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How do you convert a decimal to a percent?

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To convert a decimal to a percent, multiply the decimal by 100 and add a percent sign (%). For example, 0.0252 x 100 = 2.52%.

Front

If Jenna borrowed $4,000 for 3 years and paid $1,350 in simple interest, what was her interest rate?

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The interest rate was 11.25%.

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If Grant borrowed $1,500 at an annual simple interest rate of 12% and paid $270 in interest, how long did he borrow the money?

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Grant borrowed the money for 1.5 years.

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How much interest does Julie pay if she borrows $3,500 for 3 years at a 7% simple interest rate?

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Julie pays $735 in interest.

Front

What is the relationship between principal, rate, time, and interest in simple interest?

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The interest earned or paid is directly proportional to the principal amount, the rate of interest, and the time period.