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Simple Interest

This document discusses simple interest, providing the key formula and components used to calculate simple interest. It states that simple interest (I) is calculated as the principal (P) multiplied by the interest rate (r) multiplied by the time (t). It defines the principal as the amount of money borrowed, the interest rate as the percentage charged or earned per year, and the time as the duration in years or fractions of a year that the principal is held. Several example calculations are provided to demonstrate how to use the simple interest formula to determine the interest earned or amounts after certain time periods.

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Egie Pabionar
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2K views5 pages

Simple Interest

This document discusses simple interest, providing the key formula and components used to calculate simple interest. It states that simple interest (I) is calculated as the principal (P) multiplied by the interest rate (r) multiplied by the time (t). It defines the principal as the amount of money borrowed, the interest rate as the percentage charged or earned per year, and the time as the duration in years or fractions of a year that the principal is held. Several example calculations are provided to demonstrate how to use the simple interest formula to determine the interest earned or amounts after certain time periods.

Uploaded by

Egie Pabionar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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SIMPLE INTEREST

When we borrow money we are expected to pay for using it � this is called interest.

There are three components to calculate simple interest: principal (the amount of
money borrowed), interest rate and time.

Formula for calculating simple interest:

I = Prt

Where,
I = interest
P = principal
r = interest rate (per year)
t = time (in years or fraction of a year)

Formula for finding Simple Interest(SI):


SI [Interest] = (P×R×T)/100
P [sum] = (SI×100)/(R×T)
R [Rate/year] = (SI×100)/(P×T)
T [Time] = (SI×100)/(P×R)
where S.I. = Simple Interest, P = Principal or Sum of amount, R = % Rate per annum, T = Tim

Correct
Q.1) Mr. Smith deposited $40, 000 in a bank and earned simple interest at 7 % per annum
for two years. Calculate the interest earned at the end of the period.

A. $ 4000
B. $2800
C. $5600 (your answer)
D. $3400
E. $200
Explanation
Interest is PRT/100, 40000 X 7 X 2 /100 = 5600
Unanswered
Q.2) Principal + Interest = ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Possible correct answers:


 Amount

Explanation
P + I = A ( amount) accruing
Unanswered

Q.3) .............................the percent charged or earned

Possible correct answers:

 Rate of interest
 Rate

Unanswered
Q.4) 1. How much simple interest is due on a loan of US$120 for two years if the annual
rate of interest is 5 ½ %.

A. $12
B. $13.20 (correct answer)
C. $26.40
D. $26
E. $33
Explanation
I = PRT/100

P= 120, R= 5.5%, Time = 2 years, Warning if time in months always express it iterms of
years, by put the month value over 12
Correct
Q.5) 5. A man wishes to invest $1500 . He can invest in uLintplus Investment club which
pays simple interest of 8%for 3 years. What is the amount in his account after 3
years

A. $18321
B. $1860 (your answer)
C. $1830
D. $1524
E. $5024
Explanation
I = 1500 X 8 X 3/100
I = $360
Amount = Principal + Interest
A = 1500 + 360
1860
Correct
Q.6) Calculate the time T for $1000 to become$1300 at a rate of 5 %

A. 3 years
B. 6 years (your answer)
C. 9 years
D. 6. 5 months
E. 10 years
Explanation
Time T = SI X 100/P X R
Amount = P + I
1300 = 1000 + I
I =300

Substitute in formula
T = 300 X 100 / 1000 X 5

= 6 years
Unanswered
Q.7) Find the sum that amounts to $2040 in 6 months at 4 %

A. $ 200
B. $2000 (correct answer)
C. $1300
D. $2400
E. $1020
Explanation
P = I X 100/R X T
A (amount) =$2040
p = A- I
I = 2040 - P
I = PRT/100
2040- P = PX4X6/100X12
2040 - p =P/50
2040 = P + p /50
2040 = 51P/50
P= $2000
Wrong
Q.8) When you borrow money from the bank you pay

debt(your answer)
Possible correct answers:

 interest
 Simple Interest

Wrong
Q.9) The amount of money borrowed or invested is called

principal(your answer)
Possible correct answers:

 prncipal

Formula:

Total Amount = Principal + CI (Compound Interest)

a. Formula for Interest Compounded Annually


Total Amount = P(1+(R/100))n

b. Formula for Interest Compounded Half Yearly


Total Amount = P(1+(R/200))2n

c. Formulae for Interest Compounded Quarterly


Total Amount = P(1+(R/400))4n

d. Formulae for Interest Compounded Annually with fractional years (e.g 2.5 years)
Total Amount = P(1+(R/100))a×(1+(bR/100))
here if year is 2.5 then a =2 and b=5

e. With different interest rates for different years


Say x% for year 1, y% for year2, z% for year3
Total Amount = P(1+(x/100))*(1+(y/100))*(1+(z/100))

where CI = Compound Interest, P = Principal or Sum of amount, R = % Rate per annum, n = Time Span in
years

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