Simple interest is calculated by multiplying the principal amount by the interest rate and time period. It is the simplest form of interest calculation that only considers the initial investment amount. The document provides the formula for calculating simple interest (I=Pnr) and examples of using it to calculate interest earned on loans and investments over different time periods and interest rates.

1. Simple Interest
Stage 4 - Year 10

2. Simple Interest (1/4)
Interest
The money paid to a borrower or investor
for the use of money.
Simple Interest
The simplest form of interest calculation.
Calculated by using only the initial investment.
Simple Formula Number of
Interest periods
I = P n r
Principal Rate of
or Money interest
2

3. Simple Interest Example (2/4)
Calculate Interest on a loan of $25 00 at
8.9% per annum for 7 years.
I=Pnr
8.9% = 8.9
100 = 25 00 x 7 x 0.089
= 0.089 = $15 57.5
Calculate return on an investment of $1 200
at 7.5% per annum for 5 years.
I=Pnr
7.5% = 7.5 = 1 200 x 5 x 0.075
100
= $450
= 0.075
3

4. Simple Interest Example (3/4)
Calculate return on an investment of $9000
at 5% per annum for 9 months.
9
9 months =
12
I=Pnr
= 3
4 = 9000 3 x 0.05
x
4
5 = $337.5
5% =
100
= 0.05
4

5. Simple Interest Example (4/4)
How long will it take to earn $100 on an
investment of $500 at 10% per annum.
I=Pnr
r = 10
100 100 = 500 x n x 0.10
= 0.10 100 = 50n
÷50 ÷50
n = 2 years
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