SIMPLE INTEREST

Simple Interest

Definition Of Simple Interest

Simple interest is the interest calculated only on the principal regardless of the interest earned so far.
The formula for simple interest is I = prt where I is the simple interest, p is the principal, r is the rate of interest, and t is the period of time.

Video Examples: How To Solve Simple Interest Problems

Example of Simple Interest

The simple interest on $4,000 at 5% for 1 year is $200. I = prt = 4,000 × 5/100 × 1 = 200.

Solved Example on Simple Interest

Ques: Find the simple interest for 2 years at a rate of 6% on $1,500.

Choices:

A. $285
B. $180
C. $105
D. $240
Correct Answer: B

Solution:

Step 1: Simple Interest = prt [Formula for simple interest.]
Step 2: = 1500 × 0.06 × 2 [Substitute p = 1500, r = 0.06, t = 2. Use 0.06 for 6%.]
Step 3: = $180 [Simplify.]
Step 4: The simple interest on $1500 for 2 years is $180.

Quick Summary

Simple interest is calculated only on the principal.
The formula is I = prt, where I is interest, p is principal, r is rate, and t is time.

\[ I = prt \]

🍎 Teacher Insights

Use real-world examples to illustrate simple interest calculations. Encourage students to identify the principal, rate, and time period in each problem carefully.

🎓 Prerequisites

Basic Arithmetic
Percentage Calculations

Check Your Knowledge

Q1: What is the simple interest on $1000 at 5% for 2 years?

A. $50 B. $100 C. $150 D. $200

Q2: If the simple interest on a loan is $60, the principal is $500 and the rate is 6%, what is the time in years?

A. 1 B. 2 C. 3 D. 4

Frequently Asked Questions

Q: What does 'principal' mean?
A: The principal is the initial amount of money borrowed or invested.

Q: How do I convert a percentage to a decimal?
A: Divide the percentage by 100 (e.g., 5% = 0.05).