Simple interest

The formula for simple interest is:

REMEMBER: This calculation only provides the interest paid.
To obtain the total value of the investment, the principal invested must be added.

The graph of the amount of simple interest against time is linear
with the gradient divided by the amount invested/borrowed being the interest rate.

When entering the values into your calculator DO NOT change the percentage to a decimal.
Enter it as given in the question and then add the % sign.
The number then is the same as in the question and you do not make an error (often accidental)
in entering a number which is not in the question.

Many people who do not understand calculators will try to make you use decimals.

Calculating the interest - various time periods.	1. How much interest will be paid on a 4 year deposit of $5,000 with interest paid annually at 3% p.a. Answer.Interest is $600.00
	2. An investment account at the local bank advertises a special rate of 2.5% p.a. payable monthly for a 8 month deposit. How much interest will be earned on a $4,200 deposit? Answer.Interest is $70.00
	3. Andy invests $25,000 in an account paying 2.3% simple interest for 20 months. How much interest does Andy receive? Answer.Interest is $958.33
	4. Calculate the simple interest earned if $13,000 is invested at 2% p.a. paid quarterly for 6 years. Answer.Interest is $1,56.00
	5. Determine the simple interest earned if $2 million is invested at 6% p.a. for 1 day. (Note: this type of transaction occurs every day in the corporate financial world). Answer.Interest is $328.77
Calculating the total value.	6. What is the final value of an investment of $500 for 2 years in an account paying monthly simple interest at a rate of 3% p.a? Answer.Total is $530
	7. $1500 is invested in an account paying simple interest at the rate of 2% p.a. The interest is calculated daily. How much is the investment worth after 270 days? Answer.Total is $1,522/19
	8. Hugh invests $5,000 in a five year Government bond paying 5% p.a. simple interest. Interest is paid at the end of each of the 5 years. Calculate the total amount Hugh will receive when the bond matures. Answer.Bond value = $6,250
	9. What is the final value of an investment of $8,500 invested at 4% p.a. simple interest paid quarterly for 3.5 years? Answer.Investment is $9,690.
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Calculating the rate.	11. Glen borrows $2,500 to buy some furniture items. His repayments are $120 per month for 2 years. (i) How much interest does Glen pay for his loan? (ii) What flat rate of interest has Glen been charged? Answer.(i) Total interest: $380. (ii) Interest rate is 7.6% p.a.
	12. The simple interest on a loan of $2,500 taken out over 4 years is $500. The loan will be repaid annually. What is the simple interest rate? Answer.Rate = 5% p.a.
	13. The graph below shows the total amount of simple interest Ashleigh pays over a period of 5 years on a $10,000 loan. What was the annual interest rate on Ashleigh's investment? Answer.Interest rate: 5% p.a.
	14. A mobile phone is purchased for $800 with monthly repayments of $27.89 spread over 3 years. (i) What is the total interest paid? (ii) What is the annual rate of interest charged? Answer.(i) Total interest = $204.04. (ii) Interest rate: 8.5% p.a.
	15. The graph below shows the value ($) of a crypto-currency over a number of years. What is the simple annual rate of increase obtained on this investment? Answer.The (dogey) crypto increased by 40% p.a.
Calculating the number of periods.	16. For how many years will $3,000 need to be invested at 2% p.a.to earn $180? Answer.3 years.
	17. The simple interest on a loan of $10,000 at 5% p.a. paid quarterly is $2,500. What was the term of the loan? Answer.Term is 5 years.
	18. How many weeks will it take for $20,000 invested at 1.5% p.a. to earn $500 simple interest? Answer.87 weeks.
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Simple interest loans - Instalments.	21. Virginia purchased a new set of furniture using a simple interest loan. The furniture cost $2300 and the interest rate on the loan is 12% p.a. If she is to pay off the loan over 2 years, what will her monthly instalments be?