Simple Interest

Front

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 = P * r * t, where I is the interest, P is the principal, r is the rate of interest per year, and t is the time in years.

Front

What is the formula for calculating Simple Interest?

Back

The formula for calculating Simple Interest is: I = P * r * t.

Front

If you invest $1,000 at a 5% simple interest rate for 3 years, how much interest will you earn?

Back

You will earn $150 in interest.

Front

What does 'principal' mean in the context of Simple Interest?

Back

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

Front

How do you convert months into years when calculating Simple Interest?

Back

To convert months into years, divide the number of months by 12.

Front

If a loan of $2,000 has a simple interest rate of 10% for 4 years, what is the total interest paid?

Back

The total interest paid is $800.

Front

What is the relationship between time and Simple Interest?

Back

The amount of Simple Interest earned increases with time; the longer the time period, the more interest is earned.

Front

How do you find the interest rate if you know the principal, interest earned, and time?

Back

You can find the interest rate using the formula: r = I / (P * t).

Front

If you have earned $300 in interest on a $1,500 loan over 2 years, what is the interest rate?

Back

The interest rate is 10%.

Front

What is the effect of a higher interest rate on Simple Interest?

Back

A higher interest rate results in more interest earned over the same period of time.