11th Grade Q1

Interest is cost of borrowing money.

Simple Interest

Simple interest is calculated using the principal (starting money). The formula for simple interest is:

where:

• $I_s$: Interest earned
• $P$: Principal amount (starting money)
• $r$: Interest rate (in decimal form, e.g., 5% = 0.05)
• $t$: Time (in years).

Example

Imagine you deposit $1,000 in a bank at a 5% annual interest rate for 3 years. Using the formula:

The total interest earned is 150. The total amount you have after 3 years is:

The interest grows linearly over time.

To keep track of the interest and total amount (maturity) each year, you can use a table.