Percents

Simple Interest

Calculate simple interest using I = P · r · t, where r is the annual rate as a fraction.

Example

Use I = P x r x t with the rate written as a fraction.

highlighted = computed this step

Step 1 — Formula

Set up the relationship.

I=P×r×tI=P \times r \times t
Simple interest uses I = P x r x t.principal PPrate rrtime ttinterest IIrate strip100%principal 500The formula only finds interest, not a new principal.

Step 2 — Substitute values

Substitute values: P = 500, r = 4%, t = 3.

I=500×4%×3I= \hl{500} \times \hl{4\%} \times \hl{3}
Substitute P = 500, r = 4%, and t = 3.principal P500rate r4%time t3interest IIrate strip100%principal 500Each input has one job: principal, rate, and time.

Step 3 — Convert rate

Convert the rate: 4 / 100 = 1/25.

4÷100=1254 \div 100 = \hlmath{\frac{1}{25}}
Convert the percent exactly: 4/100 = 1/25.principal P500rate r4%time t3interest IIrate strip100%4/100 = 1/25principal 500The shaded rate is 4% of 100%, the same as 1/25.

Step 4 — Multiply

Multiply: 500 x 1/25 x 3 = 60.

500×125×3=60500 \times \frac{1}{25} \times 3 = \hl{60}
Interest: 500 x 1/25 x 3 = 60.principal P500rate r4%time t3interest I60rate strip100%4/100 = 1/25principal 500interest 60The green bar shows the interest added over 3 time periods.

Step 5 — Result

Read the final result.

I=60I= 60
Interest is 60; final amount is 500 + 60 = 560.principal P500rate r4%time t3interest I60rate strip100%4/100 = 1/25principal 500interest 60amount 560Principal plus interest gives the final amount 560.
simple-interest To compute simple interest: - Convert rate: r = r% / 100. - Apply formula: I = P · r · t.