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} = 18FINAL ANSWER:
The simple interest on #450 which is borrowed for 6 months at 8% per annum is
= #18
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