How To Find Simple Interest

To find simple interest, you have to know the formula, apply the formula and simplify to your correct answer.

In this lesson, you will learn the formula and the step-by-step method for finding simple interest.

BONUS: A link to practice questions on simple interest is included at the end of this lesson.

Formula for finding simple Interest

The formula for finding simple interest is as follows:

I =\frac{PRT}{100}

• I stands for “INTEREST” which is given in Currency.
• P stands for “PRINCIPAL” which is also given in Currency.
• R stands for “RATE” which is given in Percentage.
• T stands for “TIME” which is calculated in Years.

Question on finding simple interest

Let’s take an example:

Question:

Calculate the simple interest on #450 which is borrowed for 6 months at 8% per annum.

STEP 1.

List the values in the question

I = ??

P = #450

R = 8%

T = 6 months

NOTE: Time in simple interest is always calculated in Year(s), so we convert the 6 months to a fraction of a year.

Year = 12 months

= \dfrac{6}{12} which becomes \dfrac{1}{2} when reduced to its lowest form.

So, Time (T) = \dfrac{1}{2} year

STEP 2.

Transfer the values into the formula

\frac{PRT}{100}

= \frac{450×8×\frac{1}{2}}{100}

STEP 3.

Simplify to your answer

• Use the steps for multiplication of fractions to clear the fraction.

= \frac{450×4}{100}

• Zero cancels Zero

= \frac{45×4}{10}

• Multiply the numerators

= \frac{180}{10}

• Divide by the denominator

\frac{180}{10} = 18

FINAL ANSWER:

The simple interest on #450 which is borrowed for 6 months at 8% per annum is

= #18

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Click the button to practice questions on simple interest.