Interest Formula
Buy a Car
The Stock Market
Buy a Home
Which Loan?
100
What is the formula for calculating simple interest?
I = P × R × T
Interest = Principal x Rate x Time
100
You buy a car for $20,000 with a 4% loan for 1 year. What is the interest?
$800
100
You invest $1,000 in stocks at 3% annual interest for 1 year. What is the interest?
$30
100
You borrow $200,000 at 3% simple interest for 1 year. What is the interest?
$6000
100
Loan A: $1,000 at 5% for 1 year. Loan B: $1,000 at 4% for 2 years. Which has more interest?
Answer: Loan B: $80 vs Loan A: $50
200
If P = $500, R = 5%, T = 2 years, what is the interest?
$50
200
You finance a $25,000 car at 5% for 2 years. What is the interest?
$2500
200
Invest $2,000 at 4% for 2 years. What is the interest?
$160
200
You take a $250,000 loan at 4% for 2 years. What is the interest?
$20,000
200
Loan A: $2,000 at 6% for 2 years. Loan B: $2,000 at 4% for 3 years. Which has more interest?
Answer: Loan A: $240 vs Loan B: $240 (Same)
300
What does the T stand for in: I = P x R x T, and what unit is T measured in?
Time and Years
300
Buy a $30,000 car with 6% interest for 3 years. What is the interest?
$5400
300
You invest $5,000 at 5% for 3 years. What is the interest?
$750
300
A $300,000 mortgage at 5% for 3 years. What is the interest?
$45,000
300
Loan A: $3,000 at 5% for 3 years. Loan B: $3,000 at 6% for 2 years. Which has more interest?
Answer: Loan A: $450 vs Loan B: $360 → Loan A
400
What does each variable in the simple interest formula I=P×R×T represent?
Answer:
- I: Interest earned
- P: Principal (initial amount)
- R: Annual interest rate (in decimal or percent)
- T: Time in years
400
Finance $40,000 at 7% for 4 years. What is the interest?
$11,200
400
Invest $10,000 at 6% for 4 years. What is the interest?
$2400
400
You borrow $350,000 at 6% for 4 years. What is the interest?
$84,000
400
Loan A: $4,000 at 7% for 2 years. Loan B: $4,000 at 5% for 3 years. Which has more interest?
Answer: Loan A: $560 vs Loan B: $600 → Loan B
500
Why is the rate (R) expressed as a percentage in the simple interest formula, and how is it used in calculations?
Answer:
The rate is expressed as a percentage because it represents the proportion of the principal charged as interest per year. In calculations, it must be converted to a decimal (e.g., 5% → 0.05) before multiplying with P and T.
500
Buy a $50,000 car at 8% for 5 years. What is the interest?
$20,000
500
You invest $15,000 at 8% for 5 years. What is the interest?
$6000
500
A $400,000 home loan at 7% for 5 years. What is the interest?
$140,000
500
Loan A: $5,000 at 6% for 4 years. Loan B: $5,000 at 8% for 2 years. Which has more interest?
Loan A: $1,200 vs Loan B: $800 → Loan A