Simple interest

Learning Objectives Define simple interest, principal, interest rate, and time. Identify the principal, interest rate, and time in a given word problem. Convert interest rates from percentages to decimals and time from months to years. Calculate simple interest using the formula I = Prt. Calculate the total amount (principal + interest) after a given period. Solve real-world problems involving simple interest. Explain the practical applications of simple interest in personal finance. Ever wondered how banks pay you for saving money, or how much extra you pay when you borrow? 💰 It's all thanks to something called simple interest! In this lesson, you'll learn what simple interest is and how to calculate it. Understanding simple interest is a key skill for managin...

TermDefinitionExample Simple InterestThe extra money paid for the use of borrowed money, or the extra money earned on money saved. It is calculated only on the original amount (principal).If you borrow $100 and pay back $110, the $10 extra is the simple interest. Principal (P)The initial amount of money borrowed or invested.If you deposit $500 into a savings account, $500 is the principal. Interest Rate (r)The percentage charged by the lender for the use of money, or the percentage paid by the bank for money saved. It is usually expressed as an annual percentage.A bank offers a 3% annual interest rate on savings. You must convert 3% to a decimal (0.03) for calculations. Time (t)The duration for which the money is borrowed or invested. It must always be expressed in years for simple intere...

Simple Interest Formula $I = Prt$ This formula calculates the 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 $A = P + I$ This formula calculates the total amount (A) at the end of the period. It's the original principal (P) plus the simple interest (I) earned or paid.