Simple Interest

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What is Simple Interest?

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Simple Interest is the interest calculated on the principal amount only, without compounding. It is 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.

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What does the variable 'P' represent in the formula I = P · R · T?

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'P' represents the Principal amount, which is the initial sum of money invested or loaned.

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What does the variable 'R' represent in the formula I = P · R · T?

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'R' represents the Rate of interest, expressed as a decimal or percentage, that is charged or earned on the principal.

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What does the variable 'T' represent in the formula I = P · R · T?

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'T' represents the Time period for which the money is invested or borrowed, usually measured in years.

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Calculate the simple interest for a principal of $1,000 at a rate of 7.5% for 2.5 years.

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$187.50

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Calculate the simple interest for a principal of $2,000 at a rate of 8% for 5 years.

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$800

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If Ike invests $7,660 at a rate of 7.27% for 4 years, how much interest does he earn?

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$2,227.53

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Calculate the simple interest for a principal of $300 at a rate of 7.5% for 5 years.

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$112.50

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What is the formula for calculating Simple Interest?

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The formula is I = P · R · T.

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How do you convert a percentage to a decimal for calculations?

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To convert a percentage to a decimal, divide the percentage by 100. For example, 7.5% becomes 0.075.