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Simple interest



To find the simple interest, use this formula: Interest = Principal × Rate of interest × Time



The principal is the amount of money you borrow or invest.

The rate of interest is the percent charged for the use of money

Exercises #1:

Compute the interest if the principal is 2000 dollars at a rate of interest of 5% for 4 years.

Using a calculator,

Interest = 2000 × 5% × 4 = 2000 × 0.05 × 4

Interest = 100 × 4 = 400

Exercises # 2

Compute the interest if the principal is 2,000,000 dollars at a rate of interest of 4% for a year

Using a calculator,

Interest = 2,000,000 × 4% × 1

Interest = 2,000,000 × 0.04 × 1

Interest = 80,000 × 1 = 80,000

If you have 2 millions dollars and your bank pay you 4% interest every year, you will earn 80,000 dollars every year.

Great, you can quit your day time job!

Exercises # 3

Compute the interest if the principal is 100 dollars at a rate of interest of 2% for 10 year

Using a calculator,

Interest = 100 × 2% × 10

Interest = 100 × 0.02 × 10

Interest = 2 × 10 = 20

With little money invested and low interest, 10 years investment gives you a mere 20 dollars

This might be a waste of time!


Simple interest quiz:










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