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!