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Example Questions
Example Question #1 : Interest Problems
Grandpa Jack wants to help pay for college for his grandson, Little Jack. Little Jack is currently 8 years old. Grandpa Jack makes a one-time deposit into an account that earns simple interest every year. Grandpa Jack invests $10,000 now and in ten years, that will grow to $15,000. What rate of simple interest did Grandpa Jack receive?
4%
2%
3%
6%
5%
5%
To calculate simple interest, the formula is
where stands for Future Value, stands for Present Value, stands for the interest rate, and stands for the number of periods (in this case years). So plugging in,
Solving this we get
or 5%
ALTERNATE SOLUTION:
Another way of finding this is to calculate the amount of interest per year. Since this is simple interest, Grandpa Jack earns the same amount of interest per year. The total interest earned is 15,000-10,000= 5,000. $5,000 over 10 years, equates to $500 per year. $500 divided by the original $10,000 is .05, or 5%.
Example Question #2 : Interest Problems
How much interest would an investment yield if the principal of is invested for years at a simple interest?
Example Question #3 : Interest Problems
What rate does Johnny need if he would like to yield in interest from a principal of in years?
Example Question #4 : Interest Problems
A bank offers a business a loan in the amount of $13,000 with a simple annual interest rate of 9%. How much will the business owe the bank after 3 years?
The accrual of simple interest can be found in two steps. First, multiply the principal amount by the interest rate. Second, multiply that result by the number of years during which interest will accrue.
The question asks for the total amount that the business will owe the bank, so we must add the interest accrued to the principal amount.
Example Question #5 : Interest Problems
John has to invest for years for return. How much simple interest will his investment yield?
Simple interest formula:
Example Question #6 : Interest Problems
How many years would it take Marissa to make in interest using a simple interest investment of in principal at 5% return?
Simple interest formula is:
Therefore, solving for the time factor:
Example Question #5 : Calculating Simple Interest
Using the simple interest formula, what initial investment does Terry have to make to earn in interest if there is an return for years?
Simple interest formula:
Therefore, solving for the principal factor in the equation:
Example Question #4 : Interest Problems
What return does Florence have to yield in order to make in interest off of a simple investment of for years?
Simple interest formula:
Therefore, solving for the rate factor in the equation:
Example Question #3 : Calculating Simple Interest
Jesse has to invest for years for return. How much simple interest will his investment yield?
Simple interest formula:
Example Question #3 : Calculating Simple Interest
How many years would it take Julissa to make in interest using a simple interest investment of at a return?
Simple interest formula is:
Therefore, solving for the time factor: