This topic is part of the Algematics help database, and shows you how you can use Algematics to solve simple interest problems.
When you borrow money, if the repayment amount is calculated based on simple interest (also known as flat rate interest), interest is charged each year on the full amount borrowed at the beginning.Â
Â To calculate the total interest, ' I ', that you will pay on a simple interest loan, you use this formula:
I = PRT
is the 'principal', the amount borrowed.
Â You have to pay back both the principal that you borrowed, as well as the interest. If you make monthly payments, you can easily calculate the payment amount. Just add the total interest to the principal, then divide this by the number of months that you will be paying the loan back.
Consider these simple interest problems:
the amount of interest to be paid,
Â To do both of these problems, you enter the simple interest formula: I = PRT, substitute for the known quantities, simplify to a final answer, then answer the specific questions. These steps are explained below.
1Â Enter the simple interest formula
Â If the 'EMPTY' message is not displayed between the blue buttons, click the button until the message: 'INSERT' appears.
Â Â Â Â Â Â Â Â Â Â Â Â Maths...
Â and then click
Â Step 2Â Substitute for the known quantities
Click on the input box, then enter the known values, like this:
P = 3000, R = 9.0/100, T = 4
Â Example 2:
I = 50, P = 500, R = 5.0/100
Now click the (substitute) button.
Â Step 3Â Simplify to a final answer
Click the (simplify) button several times until a solution to the simple interest equation is found. These are the results for the two examples:
Â Example 1:
I = 1080
Â Example 2:
50 = 25T
In this case, you must divide both sides of the equation by 25 to find T. To do this with Algematics, click on the input box and type 25. Now click the button and then the (simplify) button. This will reduce this equation to:
2 = T
Â Step 4Â Answer the questions
Now that the unknown quantities have been calculated, the questions in examples 1 and 2 above can be answered.
Â Example 1:Â
The amount of interest to be paid back is $1080
Â Example 2:Â
Jane will take 2 years to repay her loan.
Return to step 1 above to do more simple interest problems.Â
Use Algematics to solve these simple interest problems:
(1) Ernie borrowed $5500 for a new motor bike, to be paid back over 5 years. The bank is charging him 12% simple interest, calculated yearly. Calculate:Â
the total interest that will be paid back,
(2) Linda borrowed $1500 at 5% simple interest per year, for an overseas holiday. Over the period of the loan she will pay $250 in interest. How long will Linda be making monthly payments?
[ Answers provided in Algematics help file.]Â
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