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

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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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