If money is invested for a short period of time, simple interest is paid using the following formula.
I = Prt
P represents the money invested, or principal amount, r is the simple interest rate, and t represents the time, in years, the money is invested.
Given P = $3,000, r = 8%, and t = 6 years, how much interest is paid?
Answers
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If an amount of money, P, the principal, is invested for a period of t years at an annual interest rate r, the amount of interest, I, earned is
I=Prt(6.4.1)
where
I = interest
P = principal
r = rate
t = time
Interest earned according to this formula is called simple interest.
The formula we use to calculate simple interest is I = Prt. To use the simple interest formula we substitute in the values for variables that are given, and then solve for the unknown variable. It may be helpful to organize the information by listing all four variables and filling in the given information.
Find the simple interest earned after 3 years on $500 at an interest rate of 6%.
Solution
Organize the given information in a list.
I = ?, P = $500, r = 6%, t = 3 years
We will use the simple interest formula to find the interest.
Write the formula. I = Prt
Substitute the given information. Remember to write the percent in decimal form. I = (500)(0.06)(3)
Simplify. I = 90
Check your answer. Is $90 a reasonable interest earned on $500 in 3 years? In 3 years the money earned 18%. If we rounded to 20%, the interest would have been 500(0.20) or $100. Yes, $90 is reasonable.
Write a complete sentence that answers the question. The simple interest is $90.
Answer:
$1440
Step-by-step explanation:
P×R×T/100= S.I.
Simple Interest = 3000×8×6/100
=1440