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Simple Interest

Table of Contents

• Simple Interest
  • Table of Contents
  • Simple Interest - Example 1
    • Simple Interest - Example 1 Solution
  • Simple Interest - Example 2
    • Simple Interest - Example 2
  • Simple Interest - Example 3
    • Simple Interest - Example 3

The formula for simple interest is:

I = PRT

where:

• P is the principal, the initial amount
• R is the interest rate as a decimal (the interest rate divided by 100)
• T is the time in years

To see how this works let's look at a few examples:

Simple Interest - Example 1

Jimmy McJimmerson invests $5,000 in Jimsbank in Jimmytown, NJ. The money earns 5% simple interest annually. How much interest does Jimmy earn after 7 years.

Simple Interest - Example 1 Solution

Jimmy's Interest is:

$$5000 \times \frac{5}{100} \times 2 = 500$$

So Jimmy earns $500 in interest!

Simple Interest - Example 2

Sally McSallington invests $2,000 in Salbank located in Salsbury, MA. The money earns 6% simple interest per annum. How much interest does Sally earn after 10 years.

Simple Interest - Example 2

Sally's interest is:

$$2000 \times \frac{6}{100} \times 10 = 1200$$

So Sally earns $1200 in interest!

Simple Interest - Example 3

Mike McMikey invests $10,000 in Mikbank. His money earns 2% simple interest annually. How much does he have in total after 15 years?

Simple Interest - Example 3

This one is a little different. First we have to figure out the interst, then we have to add that to the initial amount he invested to calculate his total.

Mike's interest is:

$$10000 \times \frac{2}{100} \times 15 = 3000$$

So, he earns $3,000 in interest. We can add that to the initial amount he invested ($10,000) to get a total of $13,000!