What you really need to know!
Simple interest is the extra amount of money paid or earned for the use of money. To find simple interest I, use the formula I = prt.
What you really need to know!
Principal p is the amount of money deposited or invested. Rate r is the annual interest rate written as a decimal. Time t is the amount of time the money is invested in years.
Example 1:
Brandon found a bank offering a certificate of deposit that pays 4% simple interest. He has $1,500 to invest. How much interest will he earn in 3 years?
I = prt
Example 1b:
Brandon found a bank offering a certificate of deposit that pays 4% simple interest. He has $1,500 to invest. How much interest will he earn in 30 months?
30 months = 2.5 years
Example 2:
Laura borrowed $2,000 from her credit union to buy a computer. The interest rate is 9% per year. How much interest will she pay if it takes 8 months to repay the loan?
8 months = 2/3 of a year
Example 3:
Alma charged a $30 handbag on her credit card with an interest rate 8%. If she has no other charges on the card, how much money would she owe after six months?
6 months = 1/2 of a year