Simple Interest Formula and Calculation

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Questions and Answers

What is the formula for simple interest?

I = P + R + T
I = P/T
I = PRT
I = (P * R * T) / 100 (correct)

If the principal amount is unknown, which formula can be used to find it?

P = I * R * T
P = I / RT (correct)
P = I + R + T
P = I / T

If the rate is unknown, which formula can be used to find it?

R = I / P * T (correct)
R = I / T
R = I * P * T
R = I + P + T

What is the total amount invested called?

Principal (B) Signup and view all the answers

What does the 'T' represent in the formula for simple interest?

Time (B) Signup and view all the answers

If a bank gives 12% simple interest and a principal amount of $5,000, what will be the interest after 2 years?

$1200 (A) Signup and view all the answers

What is the formula for calculating exact interest?

I = P * r * t (C) Signup and view all the answers

In the context of ordinary interest, how many days are considered in 1 year?

360 days (B) Signup and view all the answers

What is the maturity value formula for an investment?

M = P * (1 + r) (C) Signup and view all the answers

What is the definition of compound interest?

Interest calculated on the principal amount plus previously accumulated interest (D) Signup and view all the answers

What is the ratio for computing exact interest in terms of time?

1 year : 365 days (D) Signup and view all the answers

Which formula is used to calculate the time in years for ordinary interest?

$t = \frac{P \cdot r \cdot 360}{I}$ (C) Signup and view all the answers

What does 'maturity value' of an investment refer to?

The final amount of the investment after interest is added (C) Signup and view all the answers

What is the equivalent formula for maturity value when factoring out P?

$M = P \cdot (1 + r)$ (D) Signup and view all the answers

What does compound interest refer to?

Interest calculated on both principal and previously accumulated interest (B) Signup and view all the answers

What are considered as two (2) ratios when expressing time in days for ordinary and exact interests?

365 days : 1 year and 360 days : 1 year (D) Signup and view all the answers

What does the ratio for computing exact interest imply in terms of time?

It implies that there are more days in a year than usual (D) Signup and view all the answers

What does the ratio for computing ordinary interest imply in terms of time?

It implies that there are exactly 360 days in a year (D) Signup and view all the answers

What is the simple interest on a principal of $8,000 at a rate of 5% for 6 years?

$2,400 (B) Signup and view all the answers

If the simple interest on a certain sum of money for 3 years at 8% per annum is $720, what is the sum?

$4,500 (C) Signup and view all the answers

Maggie invested $12,000 in a savings account that offered 6% simple interest. If she received $900 as interest after a certain time, how many years did she keep the money in the account?

3 years (B) Signup and view all the answers

If $2,000 amounts to $2,600 in 2 years at simple interest, what will $3,000 amount to at the same rate and in 3 years?

$4,500 (B) Signup and view all the answers

A sum of money at simple interest amounts to $815 in 3 years and to $854 in 4 years. What is the principal sum?

$700 (B) Signup and view all the answers

If the simple interest on a certain sum of money for 5 years at 4% per annum is $400, what will be the compound interest on the same sum of money at the same rate and for the same time?

$250 (A) Signup and view all the answers

What is the equivalent formula for maturity value when factoring out $P$?

$M = P(1 + r)$ (C) Signup and view all the answers

In the context of ordinary interest, how many days are considered in 1 year?

360 days (D) Signup and view all the answers

What does the 'maturity value' of an investment refer to?

The final amount after interest is added to the initial principal (A) Signup and view all the answers

What is the formula for calculating exact interest?

$I = P \times r$ (B) Signup and view all the answers

If the rate is unknown, which formula can be used to find it?

$r = \frac{I}{Pt}$ (B), $r = \frac{I}{Pt}$ (D) Signup and view all the answers

What does compound interest refer to?

Interest added to the old principal to make a new principal (A) Signup and view all the answers

What is considered as two (2) ratios when expressing time in days for ordinary and exact interests?

"1 year: 365 days" and "1 year: 360 days" (D) Signup and view all the answers

Flashcards

Principal

The amount of money borrowed or invested.

Interest Rate

The percentage rate at which interest is calculated on the principal.