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 is calculated using the formula I = PRT, where I is the interest, P is the principal, R is the rate of interest per year, and T is the time in years.

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CCSS.7.RP.A.3

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What does the formula I = PRT represent?

Back

In the formula I = PRT, I represents the interest earned or paid, P is the principal amount, R is the annual interest rate (in decimal), and T is the time in years.

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CCSS.7.RP.A.3

Front

How do you convert months to years?

Back

To convert months to years, divide the number of months by 12. For example, 9 months is 9/12 = 0.75 years.

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CCSS.4.MD.A.1

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If Mark took out a loan of $25,690 at a simple interest rate of 5.2% for 5 years, how much interest will he pay?

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The interest paid will be $6,679.40, calculated as I = PRT = 25690 * 0.052 * 5.

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CCSS.7.RP.A.3

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What does the 'P' in the formula I = PRT stand for?

Back

The 'P' in the formula I = PRT stands for Principal, which is the initial amount of money borrowed or invested.

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CCSS.7.RP.A.3

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Ethan borrowed $2,190 at a simple interest rate of 2.5% for 3 years. How much interest will he pay?

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Ethan will pay $164.25 in interest, calculated as I = PRT = 2190 * 0.025 * 3.

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CCSS.7.RP.A.3

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Emilio borrows $1200 at 8% simple interest per year. How much will he have to pay back in total after 2 years?

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Emilio will have to pay back a total of $1392, calculated as Total = Principal + Interest = 1200 + (1200 * 0.08 * 2).

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CCSS.7.RP.A.3

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What is the difference between Simple Interest and Compound Interest?

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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.

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CCSS.7.RP.A.3

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How do you calculate the total amount to be paid back on a loan with simple interest?

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Total Amount = Principal + Interest, where Interest is calculated using I = PRT.

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CCSS.7.RP.A.3

Front

What is the annual interest rate in decimal form if the rate is 5%?

Back

The annual interest rate in decimal form is 0.05 (5% divided by 100).