You are here:

Word Problems/Simple Interest

Advertisement


Question
QUESTION: Hello:

The calculation for simple interest is interest amount = rate X time X principal amount.

The interest rate is usually per year.  Is it possible to have interest for less or longer than one year.  If so what would be the calculation for a rate for 6 months or 1 and 1/2 years?

I thank you for your reply!

ANSWER: "The interest rate is usually per year. Is it possible to have interest for less or longer than one year?"
The period can be something other than one year, but then you need to scale the units of time accordingly.

Suppose the rate is r% per year. That is is equivalent to 0.5r% per half-year, or 1.5r per 1 years.
This applies to simple interest only, not compound interest.

---------- FOLLOW-UP ----------

QUESTION: Hello:

I want to thank you for your reply;

Can you explain "... need to scale the units of time accordingly."?

Can you provide a calculation with the rate less than one year?

Answer
"The calculation for simple interest is interest amount = rate X time X principal amount. The interest rate is usually per year."
interest dollars = r%/year t years principal dollars

If the period is half a year, the calculation changes to
interest dollars = (0.5r%/(half-year)  t half-years principal dollars

Word Problems

All Answers


Answers by Expert:


Ask Experts

Volunteer


Janet Yang

Expertise

Word problems are my favorite type of math questions! I would not feel comfortable answering questions that require specialized knowledge (Physics, Statistics, etc.) because I have not studied these in depth.

Experience

I tutor students (fifth through twelfth grades) and am a Top Contributor on Yahoo!Answers with over 24,000 math solutions.

Publications
Co-author of An Outline of Scientific Writing: For Researchers With English as a Foreign Language.

Education/Credentials
I have a Bachelor's degree in Applied Mathematics from the University of California at Berkeley, and a Master of Business Administration degree from The Wharton School.

Past/Present Clients
George White Elementary School. Homework Help program at the Ridgewood Public Library, Ridgewood, NJ. Individual students.

©2016 About.com. All rights reserved.