Use the simple interest formula I=prt, where I is the interest, p the principal, r the annual interest rate, and t the time in years.
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Practice makes perfect
If we borrow money from a bank, we pay the bank interest for the use of their money. Similarly, if we have an unpaid balance on a credit card, we also pay interest to the credit card company. To calculate the interest I, we use the simple interest formula.
I= p r t, where...
I& =Interest
p& = Principal
r& = Annual interest rate
t& = Time (in years)
We are given that the loan amount is $1000, the interest rate is 7 %, and the time is 2 years. We want to find the simple interest paid to the nearest cent. Keep in mind that 7 % is written in decimal form as 0.07.
p= 1000, r= 0.07, t= 2
To calculate the interest, let's substitute these values into the simple interest formula and evaluate the right-hand side.
