Simple & Compound Interest Calculations

What is Simple Interest?

• Simple Interest is the amount of money charged on a loan or earned on an investment over time.

• Simple Interest is a complex calculation involving multiple variables.

• Simple Interest is the interest calculated on the initial principal and also on the accumulated interest of previous periods.

• Simple Interest is a type of interest that compounds monthly.

What is the formula for Simple Interest?

• I = P × R × T

• I = P + R + T

• I = (P × R) / T

• I = P × R × T / 100

In the formula I = P × R × T, what does 'P' stand for?

• Principal amount (initial loan or investment)

• Power

• Pressure

• Perimeter

Jake borrows $5,000 at an 8% interest rate for 3 years. How much interest will he pay?

• $1,200

• $1,000

• $1,500

• $1,600

Calculate the simple interest using the formula I = P × R × T. If P = $1000, R = 5%, and T = 2 years, what is the interest?

• $100

• $90

• $110

• $120

• $1100

• $1000

• $1200

• $1050

Rearrange the formula I = P × R × T to find P. What is the formula?

• P = I / (R × T)

• P = I × R × T

• P = I / R × T

• P = I × (R × T)

Which of the following is a quick tip for success when calculating interest?

• Always convert interest rates to decimals.

• Ignore time units.

• Use unclear steps.

Explain how you would apply the formula I = P × R × T to a real-life business loan scenario.

• By calculating the interest on a loan using the principal amount, interest rate, and time period.

• By determining the total loan amount needed for a business.

• By assessing the risk factors involved in a business loan.

• By evaluating the creditworthiness of a business.

What is compound interest calculated on?

• Only the original principal

• Only the accumulated interest

• Both the original principal and the accumulated interest

• None of the above