FLASHCARD | Calculating Simple Interest

Front

What is Simple Interest?

Back

Simple Interest is the interest calculated on the principal amount for a specific period of time at a given rate.

Front

What is the formula for calculating Simple Interest?

Back

The formula is: I = P * R * T, where I is interest, P is principal, R is rate (in decimal), and T is time (in years).

Front

If the principal is $500 and the rate is 5% for 3 years, what is the Simple Interest?

Back

I = 500 * 0.05 * 3 = $75.

Front

How do you convert a percentage to a decimal?

Back

To convert a percentage to a decimal, divide the percentage by 100.

Front

What is the principal in the Simple Interest formula?

Back

The principal is the initial amount of money that is invested or loaned.

Front

If you have 24 months, how do you convert it to years for the Simple Interest calculation?

Back

Divide the months by 12: 24 months ÷ 12 = 2 years.

Front

What does the 'R' in the Simple Interest formula stand for?

Back

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

Front

If the interest earned is $50 and the principal is $1000, what is the rate of interest?

Back

Rate R = I / (P * T). If T = 1 year, R = 50 / (1000 * 1) = 0.05 or 5%.

Front

What is the time in years if you have 36 months?

Back

Time T = 36 months ÷ 12 = 3 years.

Front

What is the interest earned on $2000 at a rate of 3% for 4 years?

Back

I = 2000 * 0.03 * 4 = $240.