How to Solve Simple Interest Problems

How to Solve Simple Interest Problems

Learn how to solve simple interest problems using simple interest formula.

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Step by step guide to solve simple interest

  • Simple Interest: The charge for borrowing money or the return for lending it.
  • To solve a simple interest problem, use this formula:
    Interest \(=\) principal \(\times\) rate \(\times\) time  \( ⇒ \color{blue}{I=p \ × \ r \ × \ t}\)  

Simple Interest – Example 1:

Find simple interest for \( $450\) investment at \(7\%\) for \(8\) years.

Solution:

Use Interest formula: \(\color{ blue }{I=prt }\)
P \(=$450\), r \(=7\%=\frac{7}{100}=0.07\) and t \(=8\)
Then: I \(=450 \ × \ 0.07 \ × \ 8=$252\)

Simple Interest – Example 2:

Find simple interest for \( $5,200\) investment at \(4\%\) for \(3\) years.

Solution:

Use simple interest formula: \(\color{ blue }{I=prt }\)
P \(=$5,200\), r \(=4\%=\frac{4}{100}=0.04\) and t \(=3\)
Then: I \(=5,200 \ × \ 0.04 \ × \ 3=$624\)

Simple Interest – Example 3:

Find simple interest for \($5,000\) investment at \(3\%\) for \(4\) years.

Solution:

Use simple interest formula: \(\color{ blue }{I=prt }\)
\( P=$5,000, r=3\%=\frac{3}{100}=0.03\) and \(=4\)
Then: \(I=5000×0.03×4=$600\)

Simple Interest – Example 4:

Find simple interest for \($900\) at \(3.5\%\) for \(5\) years.

Solution:

Use simple interest formula: \(\color{ blue }{I=prt }\)
\( P=$900, r=3.5\%=0.035\) and \(t=5\)
Then: \(I=900×0.035×5=$157.50\)

Exercises for Solving Simple Interest

Use simple interest to find the ending balance.

  1. \($1,300\) at \(5\%\) for \(6\) years.
  2. \($5,400\) at \(7.5\%\) for \(6\) months.
  3. \($25,600\) at \(9.2\%\) for \(5\) years.
  4. \($240\) interest is earned on a principal of \($1500\) at a simple interest rate of \(4\%\) interest per year. For how many years was the principal invested?
  5. A new car, valued at \($28,000\), depreciates at \(9\%\) per year from original price. Find the value of the car \(3\) years after purchase.
  6. Sara puts \($2,000\) into an investment yielding \(5\%\) annual simple interest; she left the money in for five years. How much interest does Sara get at the end of those five years?

Download Simple Interest Worksheet

This image has an empty alt attribute; its file name is answer-3.png

Answers

  1. \(\color{blue}{$1,690.00}\)
  2. \(\color{blue}{$5,602.50}\)
  3. \(\color{blue}{$37,376.00}\)
  4. \(\color{blue}{4 \ years}\)
  5. \(\color{blue}{$20,440}\)
  6. \(\color{blue}{$500}\)

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