Simple interest is interest paid on money borrowed or invested based on the principal amount, interest rate, and time. The formula for calculating simple interest is I = p*r*t, where I is interest, p is principal, r is the annual interest rate expressed as a decimal, and t is time in years. For example, if the principal is $500, the interest rate is 5% for 3 years, the interest earned is $75 using the formula I = 500 * 0.05 * 3.

1. Simple Interest

2. DO NOW
Convert the following percentages into
decimals.
7% 25% 3.5%
Mike drove for 120 miles at a rate of 60 miles
per hour. For how long did he drive? (d = rt)
AIM: I will be able to calculate simple interest
using the formula I = prt.
70 .25 .035
120 = 60 x t
60 60 t = 2 hours

3. • Simple interest is one type of fee paid for the
use of money.
• To calculate simple interest, use the formula
I = p•r•t
I is the amount of interest in dollars
p is the principal (amount money invested or
borrowed)
r is the annual interest rate
t is time in years

4. The principal is $500, rate is 5% and time is 3 years.
Find the interest.
I = p x r x t
p r t
I = 500 x .05 x 3
I = $75
I

5. The interest earned is $150. If the rate is 6% and
the time is 25 years, determine the original
principal.
I = p x r x t
I r
t
150 = p x .06 x 25
150 = p x 1.5
1.5 1.5
p = $100
p