Reagan Made $90 In Interest By Placing $6,000 In A Savings Account With Simple Interest For 3 Months. What Was The Interest Rate?Use The Formula I = P R T I = Prt I = P R T , Where:- I I I Is The Interest Earned,- P P P Is The Principal

Introduction

Simple interest is a type of interest calculated on the initial principal amount, without taking into account the interest that has accrued on the principal. It is a straightforward and easy-to-understand concept, making it a fundamental aspect of finance and mathematics. In this article, we will delve into the world of simple interest and explore how to calculate interest rates using the formula $i = prt$. We will also use a real-life example to illustrate the concept and provide a step-by-step guide on how to calculate the interest rate.

What is Simple Interest?

Simple interest is a type of interest that is calculated on the initial principal amount, without taking into account the interest that has accrued on the principal. It is a straightforward and easy-to-understand concept, making it a fundamental aspect of finance and mathematics. The formula for simple interest is $i = prt$, where:

• $i$ is the interest earned
• $p$ is the principal (initial amount)
• $r$ is the interest rate (as a decimal)
• $t$ is the time period (in years)

The Formula: $i = prt$

The formula $i = prt$ is the foundation of simple interest calculations. It states that the interest earned ($i$) is equal to the principal ($p$) multiplied by the interest rate ($r$) multiplied by the time period ($t$). This formula is widely used in finance and mathematics to calculate interest rates, investment returns, and loan repayments.

Calculating Interest Rates

Now that we have a solid understanding of simple interest and the formula $i = prt$, let's use a real-life example to illustrate how to calculate interest rates. Suppose Reagan made $90 in interest by placing $6,000 in a savings account with simple interest for 3 months. We want to calculate the interest rate ($r$) using the formula $i = prt$.

Step 1: Convert the Time Period to Years

The time period is given as 3 months, but we need to convert it to years to use the formula $i = prt$. Since there are 12 months in a year, we can convert 3 months to years as follows:

3 months / 12 months/year = 0.25 years

Step 2: Plug in the Values

Now that we have the time period in years, we can plug in the values into the formula $i = prt$:

$i = prt$ $90 = 6000 \times r \times 0.25$

Step 3: Solve for $r$

To solve for $r$, we can divide both sides of the equation by $6000 \times 0.25$:

$r = 90 / (6000 \times 0.25)$ $r = 90 / 1500$ $r = 0.06$

Step 4: Convert the Interest Rate to a Percentage

The interest rate is given as a decimal, but we want to express it as a percentage. To do this, we can multiply the decimal by 100:

$r = 0.06 \times 100$ $r = 6\%$

Conclusion

In this article, we explored the concept of simple interest and calculated the interest rate using the formula $i = prt$. We used a real-life example to illustrate the concept and provided a step-by-step guide on how to calculate the interest rate. By following these steps, you can calculate interest rates and make informed decisions about your finances.

Frequently Asked Questions

• What is simple interest? Simple interest is a type of interest calculated on the initial principal amount, without taking into account the interest that has accrued on the principal.
• How do I calculate the interest rate using the formula $i = prt$? To calculate the interest rate, you need to plug in the values into the formula, solve for $r$, and convert the decimal to a percentage.
• What is the formula for simple interest? The formula for simple interest is $i = prt$, where $i$ is the interest earned, $p$ is the principal, $r$ is the interest rate, and $t$ is the time period.

Additional Resources

• Simple Interest Calculator
• Interest Rate Calculator
• Simple Interest Formula

References

• Investopedia: Simple Interest
• Math Is Fun: Simple Interest
• Wikipedia: Simple Interest
  Simple Interest Q&A =====================

Frequently Asked Questions

What is simple interest?

Simple interest is a type of interest calculated on the initial principal amount, without taking into account the interest that has accrued on the principal.

How do I calculate the interest rate using the formula $i = prt$?

To calculate the interest rate, you need to plug in the values into the formula, solve for $r$, and convert the decimal to a percentage.

What is the formula for simple interest?

The formula for simple interest is $i = prt$, where $i$ is the interest earned, $p$ is the principal, $r$ is the interest rate, and $t$ is the time period.

What is the difference between simple interest and compound interest?

Simple interest is calculated on the initial principal amount, while compound interest is calculated on the initial principal amount and any accrued interest.

How do I calculate the interest earned using the formula $i = prt$?

To calculate the interest earned, you need to plug in the values into the formula, solve for $i$, and use the formula $i = prt$.

What is the time period in the formula $i = prt$?

The time period is the amount of time the money is invested or borrowed for, usually expressed in years.

How do I convert the time period from months to years?

To convert the time period from months to years, you can divide the number of months by 12.

What is the interest rate in the formula $i = prt$?

The interest rate is the rate at which the interest is calculated, usually expressed as a decimal.

How do I convert the interest rate from a decimal to a percentage?

To convert the interest rate from a decimal to a percentage, you can multiply the decimal by 100.

What is the principal in the formula $i = prt$?

The principal is the initial amount of money invested or borrowed.

How do I calculate the principal using the formula $i = prt$?

To calculate the principal, you need to plug in the values into the formula, solve for $p$, and use the formula $i = prt$.

What is the interest earned in the formula $i = prt$?

The interest earned is the amount of money earned as interest, usually expressed as a dollar amount.

How do I calculate the interest earned using the formula $i = prt$?

To calculate the interest earned, you need to plug in the values into the formula, solve for $i$, and use the formula $i = prt$.

What is the time value of money?

The time value of money is the concept that money received today is worth more than the same amount of money received in the future.

How do I calculate the time value of money using the formula $i = prt$?

To calculate the time value of money, you need to plug in the values into the formula, solve for $i$, and use the formula $i = prt$.

What is the present value of a future amount?

The present value of a future amount is the current value of a future amount of money, taking into account the time value of money.

How do I calculate the present value of a future amount using the formula $i = prt$?

To calculate the present value of a future amount, you need to plug in the values into the formula, solve for $p$, and use the formula $i = prt$.

What is the future value of a present amount?

The future value of a present amount is the amount of money that will be received in the future, taking into account the time value of money.

How do I calculate the future value of a present amount using the formula $i = prt$?

To calculate the future value of a present amount, you need to plug in the values into the formula, solve for $i$, and use the formula $i = prt$.

What is the difference between the present value and the future value?

The present value is the current value of a future amount of money, while the future value is the amount of money that will be received in the future.

How do I calculate the difference between the present value and the future value using the formula $i = prt$?

To calculate the difference between the present value and the future value, you need to plug in the values into the formula, solve for $i$, and use the formula $i = prt$.

What is the interest rate in the context of time value of money?

The interest rate is the rate at which the interest is calculated, usually expressed as a decimal.

How do I convert the interest rate from a decimal to a percentage?

To convert the interest rate from a decimal to a percentage, you can multiply the decimal by 100.

What is the time period in the context of time value of money?

The time period is the amount of time the money is invested or borrowed for, usually expressed in years.

How do I convert the time period from months to years?

To convert the time period from months to years, you can divide the number of months by 12.

What is the principal in the context of time value of money?

The principal is the initial amount of money invested or borrowed.

How do I calculate the principal using the formula $i = prt$?

To calculate the principal, you need to plug in the values into the formula, solve for $p$, and use the formula $i = prt$.

What is the interest earned in the context of time value of money?

The interest earned is the amount of money earned as interest, usually expressed as a dollar amount.

How do I calculate the interest earned using the formula $i = prt$?

To calculate the interest earned, you need to plug in the values into the formula, solve for $i$, and use the formula $i = prt$.

What is the present value of a future amount in the context of time value of money?

The present value of a future amount is the current value of a future amount of money, taking into account the time value of money.

How do I calculate the present value of a future amount using the formula $i = prt$?

To calculate the present value of a future amount, you need to plug in the values into the formula, solve for $p$, and use the formula $i = prt$.

What is the future value of a present amount in the context of time value of money?

The future value of a present amount is the amount of money that will be received in the future, taking into account the time value of money.

How do I calculate the future value of a present amount using the formula $i = prt$?

To calculate the future value of a present amount, you need to plug in the values into the formula, solve for $i$, and use the formula $i = prt$.

What is the difference between the present value and the future value in the context of time value of money?

The present value is the current value of a future amount of money, while the future value is the amount of money that will be received in the future.

How do I calculate the difference between the present value and the future value using the formula $i = prt$?

To calculate the difference between the present value and the future value, you need to plug in the values into the formula, solve for $i$, and use the formula $i = prt$.

What is the interest rate in the context of time value of money?

The interest rate is the rate at which the interest is calculated, usually expressed as a decimal.

How do I convert the interest rate from a decimal to a percentage?

To convert the interest rate from a decimal to a percentage, you can multiply the decimal by 100.

What is the time period in the context of time value of money?

The time period is the amount of time the money is invested or borrowed for, usually expressed in years.

How do I convert the time period from months to years?

To convert the time period from months to years, you can divide the number of months by 12.

What is the principal in the context of time value of money?

The principal is the initial amount of money invested or borrowed.

How do I calculate the principal using the formula $i = prt$?

To calculate the principal, you need to plug in the values into the formula, solve for $p$, and use the formula $i = prt$.

What is the interest earned in the context of time value of money?

The interest earned is the amount of money earned as interest, usually expressed as a dollar amount.

How do I calculate the interest earned using the formula $i = prt$?

To calculate the interest earned, you need to plug in the values into the formula, solve for $i$, and use the formula $i = prt$.

What is the present value of a future amount in the context of time value of money?

The present value of a future amount is the current value of a future amount of money, taking into account the time value of money.

How do I calculate the present value of a future amount using the formula $i = prt$?

To calculate the present value of a future amount, you need to plug in the values into the formula, solve for $p$, and use the formula $i = prt$.

What is the future value of a present amount in the context of time value of money?

The future value of a present amount is the amount of money that will be received in the future, taking into account the time value of money.

How do I calculate the future value of a present amount using the formula $i = prt$?

To calculate the future value of a present amount, you need to plug in the values into the formula, solve for $i$, and use the formula $i = prt$.

What is the