Simple Interest

Show your work for each problem.

1.
In the simple interest formula , what does represent?
1. a)Period of time
2. b)Principal (starting amount)
3. c)Payment amount
4. d)Percentage rate
Answer: Principal (starting amount)
In the formula , is the Principal - the original amount of money deposited or borrowed before any interest is calculated.
2.
Convert 8% to a decimal for use in the interest formula.
Answer: 0.08
. Always convert percentages to decimals before using them in the simple interest formula.
3.
Calculate the simple interest:
Answer: 100
. The interest earned is 100 dollars.
4.
You deposit 500 dollars at 6% simple interest for 1 year. How much interest do you earn?
1. a)3 dollars
2. b)60 dollars
3. c)30 dollars
4. d)300 dollars
Answer: 30 dollars
dollars. Remember to convert 6% to 0.06!
5.
Calculate the interest on 800 dollars at 5% simple interest for 3 years.
Answer: 120
1. What is the principal (P)? 800
2. Convert 5% to a decimal (r) 0.05
3. What is the time in years (t)? 3
4. Calculate: 800 × 0.05 × 3 = ? 120
6.
You borrow 2000 dollars at 7% simple interest for 4 years. How much interest do you owe?
Answer: 560
dollars in interest owed.
7.
You invest 1500 dollars at 4% simple interest for 5 years. What is the total amount you will have?
Answer: 1800
1. Calculate the interest: 1500 × 0.04 × 5 = ? 300
2. What formula finds the total amount? A = P + I
3. Calculate the total: 1500 + 300 = ? 1800
8.
Emma borrows 3000 dollars at 8% simple interest for 2 years. What total amount must she repay?
1. a)3800 dollars
2. b)3240 dollars
3. c)480 dollars
4. d)3480 dollars
Answer: 3480 dollars
. Total = dollars.
9.
A loan of 4000 dollars at 5% simple interest for 6 months. Calculate the interest (remember: 6 months = 0.5 years).
Answer: 100
dollars.
10.
You take a car loan of 12000 dollars at 6% simple interest for 3 years. What is the total amount you will pay?
Answer: 14160
1. What is 6% as a decimal? 0.06
2. Calculate the interest: 12000 × 0.06 × 3 = ? 2160
3. Calculate total amount: 12000 + 2160 = ? 14160
11.
Which will earn more interest: 1000 dollars at 5% for 4 years, or 2000 dollars at 3% for 3 years?
1. a)They earn the same interest
2. b)Cannot be determined
3. c)2000 dollars at 3% for 3 years (180 dollars)
4. d)1000 dollars at 5% for 4 years (200 dollars)
Answer: 1000 dollars at 5% for 4 years (200 dollars)
Option 1: . Option 2: . The first option earns 20 dollars more.
12.
You earned 180 dollars in interest on a 2000 dollar deposit over 3 years. What was the annual interest rate?
Answer: 3%
1. What formula solves for rate? (r = ?) I / (P × t)
2. Calculate P × t = 2000 × 3 = ? 6000
3. Calculate r = 180 ÷ 6000 = ? 0.03
4. Convert 0.03 to a percentage 3%
13.
You want to earn 400 dollars interest from a 2500 dollar investment at 4% simple interest. How many years will it take?
Answer: 4
years.
14.
A bank account grew from 5000 dollars to 5600 dollars in 4 years with simple interest. What was the interest rate?
Answer: 3%
1. Calculate the interest earned: 5600 - 5000 = ? 600
2. Calculate P × t = 5000 × 4 = ? 20000
3. Calculate r = 600 ÷ 20000 = ? 0.03
4. Convert to percentage: 0.03 × 100 = ? 3%
15.
Lisa needs 750 dollars for a trip in 2 years. She has 600 dollars now. What minimum interest rate does she need?
1. a)12.5%
2. b)25%
3. c)10%
4. d)15%
Answer: 12.5%
Interest needed = . Rate = .
16.
What is 15 months expressed in years?
1. a)1.25 years
2. b)1.5 years
3. c)0.15 years
4. d)15 years
Answer: 1.25 years
years. This equals 1 year and 3 months.
17.
How much principal would you need to invest at 5% simple interest for 4 years to earn 600 dollars in interest?
Answer: 3000
1. What formula solves for principal? (P = ?) I / (r × t)
2. Calculate r × t = 0.05 × 4 = ? 0.2
3. Calculate P = 600 ÷ 0.2 = ? 3000