Simple Interest Calculations Flashcards

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What is simple interest?

Interest worked out only on the original amount (the principal) each period.

What is the simple interest formula?

Interest = Principal × Rate × Time (I = P × r × t).

What does principal mean?

The starting amount of money you borrow or save.

How do you turn 5% into a decimal for the formula?

Divide by 100: 5% = 0.05.

If a rate is 3% per year, what time value do you use for 18 months?

1.5 years (18 ÷ 12 = 1.5).

How much simple interest is earned on £800 at 3% per year for 4 years?

r = 0.03, t = 4, I = 800 × 0.03 × 4 = £96.

How do you find the total amount after simple interest?

Total = Principal + Interest.

How should you round money answers in pounds?

To the nearest penny (two decimal places).

What does p.a. mean in interest rates?

Per annum, which means per year.

What is the key feature of simple interest?

It is calculated only on the principal, not on any interest already earned.

If the time doubles under simple interest, what happens to the interest?

It doubles, because interest is proportional to time.

At 6% p.a., what is the simple interest on £2,000 for 6 months?

t = 0.5 years, I = 2,000 × 0.06 × 0.5 = £60.