How to Solve Simple Interest Problems Part 2

This is the second part of the Solving Simple Interest Problems Series. In the previous post, we have discussed the basics of simple interest problems. We have learned that the simple interest (I) is equal to the product of the amount of money invested or the principal (P), the percentage of interest or the rate (R) and the time (T). Therefore, we can use the following formula:

I = PRT.

In this post, we are going to discuss more problems particularly interests that are not yearly and finding unknowns other than interest.

Example 3

Dr. Lopez invested his Php120,000 in a bank that gives 2% interest every quarter. What is the interest of his money if he is to invest it for 1 years?

Solution and Explanation

Notice that the interest is applied quarterly and not every year. Quarterly means every three months and therefore it will be applied four times a year since there are four quarters every year. So in this case, the time is 4. So,

P = Php120,000
R = 2%
T = 4
I = ?

Note that the rate percent must be converted to decimal by dividing it by 100. So 2% equals 0.02. Now, using the formula, we have

I = PRT
I = (Php120,000)(.02)(4)
I = Php9600.00

So, the interest of the money for 1 year is Php9600.

Example 4

Danica invested here money amounting to Php150,000 in a bank that offers a 5% simple interest every year. She went abroad and never made any deposit or withdrawal in her account. After coming back, she immediately checked her account and found out that her money got an interest of Php37,500. How many years was the money invested?

Solution and Explanation

In this problem, interest is given and time is unknown. Assigning the values we have

I = Php37,500
P = Php150,000
R = 5%
T = ?.

Using the formula, we have

I = PRT

Converting 5 percent to decimal and substituting, we have

37,500 = (150,000)(.05)(T)
37,500 = 7500(T).

Dividing both sides by 7500, we have

5 = T.

That means that the money was invested for 5 years.

In the next post, we will be solving simple interest problems whose uknowns are rate and principal.

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1 Response

  1. August 20, 2015

    […] is the third and last part of the Solving Simple Interest Problems Series. In the first and second part of this series, we have learned how to solve simple interest problems. In this post, we […]

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