SIMPLE

INTEREST
SIMPLE INTEREST

Simple Interest is an easy method

of calculating the interest for a
loan/principal amount. Simple
interest is a concept that is used in
many sectors such as banking,
finance, automobile, and so on.
 FORMUL A
I-INTEREST
P - P R I N C I PA L
R- RAT E / P E RC E N TA G E
T-T I M E

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 FORMUL A
I = P RT
BY M U LT I P LY I N G T H E P R I N C I PA L ,
RAT E , A N D T I M E YO U W I L L H AV E
T H E A M O U N T O F I N T E R E S T.

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 FORMUL A
T O F I N D T H E A C C U M U L AT E D
VA LU E YO U J U S T N E E D T O A D D
T H E P R I N C I PA L A N D I N T E R E S T

AV = P + I

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EXAMPLES OF

SIMPLE INTEREST

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EXAMPLE NO.1

• A person deposits 5,000 in a bank account which pays 6%

simple interest per year. Find the value of his deposit after 4
years.

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SOLUTION NO.1

• P = 5,000
r = 6%
T = 4 (years)
I = ? (PrT)
Accumulated Value = ? (P + I) (5,000 + I)

• I = 5,000(6% or 0.06)(4)

• I = 1,200

• Accumulated Value = 5,000 + 1,200 = 6,200

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EXAMPLE NO.2

• Glen received 2,250 loan from bank. After six months, he

paid back 2,295 and closed the loan. Find the rate of
interest.

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SOLUTION NO.2

• P = 2,250
r=?
T = 1/2 or 0.5(6 months, but because banks considers time
as per year whereas 6months = ½ year).
I = PrT [or 2,250(r)(0.5)]
Accumulated Value = 2,295

• If we have the accumulated value and principal we can get

the amount of Interest by subtracting the principal to the
accumulated value.

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SOLUTION NO.2

• I = 2,295 – 2,250 = 45
and now that we know the value of interest.

• I or 45 = 2,250(r)(0.5)
multiply the 2,250 to 0.5 will become 1,125 so
45 = 1,125(r)
and dividing both sides by 1,125
r = 45/1,125

• r = 0.04 or 4%

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EXAMPLE NO.3

• A man invests 16,500 in two kinds treasury notes, which

yield 7.5% and 6% annually. After two years year, he earns
2,442 in interest. How much does he invest at the 6 %
rate ?

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SOLUTION NO.3

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SOLUTION NO.3

• Let’s say the principal invested in the account where 6%

rate is x.
which makes the principal where the 7.5% is 16,500 – x.

• If we add both the interests after 2 years of both accounts

we will have 2,442 which means.

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SOLUTION NO.3

[move the 2,475 to the right side.]

[divide both sides with -0.03]

• Which means that

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EXAMPLE NO.4

• In simple interest, a sum of money doubles itself in 10

years. Find the number of years it will take to triple itself.

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EXAMPLE NO.4

• In simple interest, a sum of money doubles itself in 10

years. Find the number of years it will take to triple itself.

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SOLUTION NO.4

• If a principal takes 10 years to become double that means

that in 10 years you will have an interest that is the same
with your principal. And because this is a simple interest
that means to find how many years it will take to make it
triple the principal you just need to add another 10 years to
have another interest that have the same value of principal.
Whereas the answer will be 20 years .

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EXAMPLE NO.5

• In simple interest, a sum of money amounts to 6200 in 2

years and 7400 in 3 years. Find the principal.

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SOLUTION NO.5

• If we subtract the value after 3 years to the value after 2

years we will get the value of the interest for 1 year or per
year.

• This means that in 2 years the interest we have is (1,200 *

2) 2,400.

• Subtracting the interest after 2 years to the value we get

after 2 years. . Which makes the principal amount 3,800.

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COMPOUND
INTEREST
COMPOUND INTEREST

Compound interest is interest that applies

not only to the initial principal of an
investment or a loan, but also to the
accumulated interest from previous periods.
In other words, compound interest involves
earning, or owing, interest on your interest.
 FORMUL A
A-AMOUNT
P - P R I N C I PA L
R- RAT E / P E RC E N TA G E
N-NUMBER OF TIMES
COMPOUNDED PER YEAR
T-T I M E ( Y E A R S )

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 FORMUL A

I F YO U WA N T T O F I N D T H E T O TA L
NUMBER OF COMPOUNDED INTEREST
T H E N YO U A R E G O I N G T O S U B T RA C T T H E
A M O U N T T O T H E P R I N C I PA L .

COMPOUNDED INTEREST = A-P

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 FORMUL A
R E M E M B E R T H AT I N N ( N U M B E R O F T I M E S
COMPOUNDED PER YEAR)
Compounded annually
formula
Compounded Semi-annually
formula
Compounded Quarterly formula
Compounded Monthly formula
Compounded weekly formula
Compounded Daily formula

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 EXAMPLES OF

COMPOUND INTEREST

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EXAMPLE NO.1

• Frank deposited 3,400 into a savings account that pays 2%

interest compounded monthly. How much money will he get
after 8 years? Round your answer to the nearest
hundredths.

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SOLUTION NO.1

• P = 3,400
r = 2% or 0.02
n = 12
t = 8 (years)

• PS: It is more accurate to input all in your SciCal.

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EXAMPLE NO.2

• Vivien is saving money so she can open a coffee shop after

4 years. She invests 7,500 in bonds, and interest rate is 3%
compounded annually. How much money will Vivien have
when it’s time to open the shop?

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SOLUTION NO.2

• P = 7,500
r = 3% or 0.03
n=1
t = 4 (years)

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EXAMPLE NO.3

• Anya deposits 4,550 in an account that offers 3% in interest

compounded half-yearly. She is planning to fund her child’s
higher studies with this money. How much money, rounded
to the nearest hundredths, will be in the account after 6
years?

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SOLUTION NO.3

• P = 4,550
r = 3% or 0.03
n=2
t = 6 (years)

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EXAMPLE NO.4

• Mr. Turner invests 20,000 in a retirement account. The

investment is for 7 years, and the interest rate is 8%
compounded half-yearly. What will be the final balance
rounded to the nearest hundredths.

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SOLUTION NO.4

• P = 20,000
r = 8% or 0.08
n=2
t = 7 (years)

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EXAMPLE NO.5

• Sharon deposited 520 in a new regular savings account that

earns 6% interest compounded monthly. How much will she
get at the end of the year?

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SOLUTION NO.4

• P = 520
r = 6% or 0.06
n = 12
t = 1 (year)

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