Mathematics
Grade 6
15 min
Simple interest
Simple interest
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1
Introduction & Learning Objectives
Learning Objectives
Identify the principal, interest rate, and time in a simple interest problem.
Convert an annual interest rate from a percentage to a decimal for calculations.
Calculate simple interest using the formula I = P × R × T.
Determine the total amount (principal plus interest) after a given period.
Solve real-world word problems involving simple interest for savings and loans.
Explain the basic concept of why interest is paid or charged.
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In this lesson, you'll learn about simple interest, a fundamental concept in consumer math. You'll understand how to calculate the ext...
2
Key Concepts & Vocabulary
TermDefinitionExample
InterestThe extra money paid for borrowing money, or the extra money earned for saving money.If you put $100 in a bank and earn $5, that $5 is the interest.
Principal (P)The original amount of money borrowed or saved.If you save $500, then $500 is the principal.
Interest Rate (R)A percentage that tells you how much interest will be charged or earned each year. It's usually given as a percentage per year (per annum).A 5% interest rate means you earn or pay 5 cents for every dollar per year.
Time (T)The duration for which the money is borrowed or saved, always expressed in years.If you save money for 3 years, then 3 is the time. If it's 6 months, you'd use 0.5 years.
Simple Interest (I)Interest calculated only on the original principal amount. It does no...
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Core Formulas
Simple Interest Formula
I = P \times R \times T
Use this formula to calculate the amount of simple interest (I) earned or paid. P is the principal, R is the annual interest rate (as a decimal), and T is the time in years.
Total Amount Formula
A = P + I
Use this formula to find the total amount (A) of money after interest has been added to the principal (P).
Converting Percentage Rate to Decimal
R_{decimal} = R_{percent} / 100
Always convert the given percentage interest rate into its decimal form before using it in the simple interest formula.
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Challenging
A loan of $400 accumulated $48 in simple interest over a period of 3 years. What was the annual simple interest rate?
A.3%
B.4%
C.6%
D.12%
Challenging
An investment of $500 earns $50 in simple interest over a certain period. At the same interest rate and for the same amount of time, how much interest would an investment of $800 earn?
A.$80
B.$100
C.$50
D.$130
Challenging
Liam invests $1,000 at a 4% simple interest rate for 5 years. If the interest rate had been 6% instead, how much MORE interest would he have earned?
A.$200
B.$300
C.$100
D.$500
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