Did you know?
Did you know that when calculating interest, there are three key factors to consider: the principal amount, the interest rate, and the time period? Let's break down some examples to understand how these factors work together.
1. $4,200 at 12% for 2 years:
Interest = principal amount x interest rate x time
= $4,200 x 0.12 x 2
= $1,008
The interest earned on this loan would be $1,008.
2. $850 at 9% for 6 months:
To calculate the interest for a shorter time period, we need to adjust the time to match the rate. So, 6 months is equivalent to 0.5 years.
Interest = $850 x 0.09 x 0.5
= $38.25
The interest earned on this loan would be $38.25.
3. $4,000 at 15% for 3 years:
Interest = $4,000 x 0.15 x 3
= $1,800
The interest earned on this loan would be $1,800.
4. $6,250 at 10% for 18 months:
To calculate the interest for a longer time period, we need to adjust the time to match the rate. So, 18 months is equivalent to 1.5 years.
Interest = $6,250 x 0.10 x 1.5
= $937.50
The interest earned on this loan would be $937.50.
5. $10,000 at 8.5% for 4 years:
Interest = $10,000 x 0.085 x 4
= $3,400
The interest earned on this loan would be $3,400.
6. $5,000 at 9% for 2 years:
Interest = $5,000 x 0.09 x 2
= $900
The interest earned on this loan would be $900.
By understanding how interest is calculated, you can make informed decisions about borrowing or investing money.
