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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