Simple Interest

INTRODUCTION

·       DEFINITION 1           : Interest is money earned when money is invested.

·       DEFINITION 2           : Interest is a charged incurred when a loan or credit is obtained.

SIMPLE INTEREST FORMULA

Simple interest is given by the following formula with

                                                I              = Simple Interest

                                                P             = Principal

                                                r              = Simple Interest Rate

                                                t              = Time (in years)

Example 1

Find the amount of interest charged for the following loans.

a)     A loan of RM2500 at rate of 6.25% for 4 years.

b)    A loan of RM1800 at rate of 7% for 30 months.

c)     A loan of RM800 at a rate of 10% for 5 years and 6 months. 

Example 2

A man applies for a personal loan from a bank for the amount of RM21000. The bank charges interest of 11%. If the bank calculates that the interest is RM16170, how long is the duration of the loan?

 Example 3

Rashid opened an account with a deposit of RM400. Two months later, he deposited an additional RM500 into the account. The account pays an interest of 8%. Calculate the interest for

a)     the first two months after opening the account

b)    the next four months after he made his second deposit.