Simple interest
Use the simple interest formula to calculate interest and find unknown values in financial problems.
Worked examples
Calculating simple interest
Straightforward
Problem
Calculate the simple interest earned on a principal of at per annum for years.
1
Identify the values.
, (convert to a decimal),
2
Write the simple interest formula.
3
Substitute the values and calculate.
Answer
The simple interest earned is .
Finding the principal
Moderate
Problem
Simple interest of is earned at per annum over years. Find the principal.
1
Identify the known values.
, , ,
2
Rearrange the formula to make the subject.
3
Substitute and calculate.
Answer
The principal was .
Finding the total amount repaid
Challenging
Problem
Sarah borrows at per annum simple interest for years. What is the total amount she must repay?
1
Identify the values.
, (convert to a decimal),
2
Calculate the interest using .
3
Find the total amount using .
Answer
Sarah must repay a total of .
Practise
Q1·Straightforward
Calculate the simple interest earned on a principal of at an interest rate of per annum for years.
Explanation
Using : .
Q2·Straightforward
A deposit of earns simple interest at per annum. How much interest (in dollars) is earned over years?
Explanation
Using : .
Q3·Straightforward
Calculate the simple interest on invested at per annum for years.
Explanation
Using : .
Q4·Straightforward
How much simple interest is earned on a principal of at per annum over years?
Explanation
Using : .
Q5·Moderate
Simple interest of is earned at per annum over years. What was the principal (in dollars)?
Explanation
Rearranging : .
Q6·Moderate
A principal of earns in simple interest over years. What is the annual interest rate as a percentage?
Explanation
Rearranging: .
Q7·Moderate
A principal of earns in simple interest at per annum. For how many years was the money invested?
Explanation
Rearranging: years.
Q8·Moderate
Simple interest of is earned at per annum over years. Find the principal (in dollars).
Explanation
Rearranging : .
Q9·Challenging
Emma invests at per annum simple interest for years. What is the total amount in her account at the end of this period?
Explanation
Interest: . Total amount: .
Q10·Challenging
A loan of is taken out at per annum simple interest for years. What is the total amount owed at the end of the loan period?
Explanation
Interest: . Total amount: .
Q11·Challenging
Two investments are compared. Investment A: at p.a. simple interest for years. Investment B: at p.a. simple interest for years. How much more does Investment B return in total than Investment A?
Explanation
Investment A: , so . Investment B: , so . Difference: .
Q12·Challenging
Thomas invests at per annum simple interest. After years, what is the total amount in the account?
Explanation
Interest: . Total amount: .