Calculate simple interest

Simple interest is calculated as $I=Prt$ , where $P$ is the principal, $r$ is the interest rate expressed as a decimal per time period, and $t$ is the number of matching periods; the total amount is $A=P+I=P(1+rt)$ . The relationship is proportional to principal, rate, and time, and differs from compound interest, which is not included here.

Detailed Explanation: Calculate simple interest

Simple interest is the amount earned or charged based only on the original principal.

Use the formula

I=Prt

where:

$I$ is the simple interest,
$P$ is the principal, or starting amount,
$r$ is the interest rate written as a decimal,
$t$ is the number of matching time periods.

To find the total amount, use

A=P+I

Example

You deposit 800 $in an account that earns$ 5%$ simple interest per year. How much interest will you earn in 3 years, and what will be the total amount?

Step 1: Identify the values.

P=800,\qquad r=5\%=0.05,\qquad t=3

Convert $5\%$ to a decimal by dividing by $100$ .

Step 2: Substitute into the simple-interest formula.

I=Prt

I=800(0.05)(3)

Step 3: Calculate the interest.

I=120

You will earn 120$ in simple interest.

Step 4: Find the total amount.

A=P+I

A=800+120=\$920

Therefore, the interest is 120} $, and the total amount is$ \boxed{$920}$.

Learn by doing: Calculate simple interest

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Interest (Simple) - Interest from Principle, Rate, and Time

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