This Math quiz is called 'Consumer Math (Calculating Simple Interest)' and it has been written by teachers to help you if you are studying the subject at middle school. Playing educational quizzes is a fabulous way to learn if you are in the 6th, 7th or 8th grade - aged 11 to 14.
What is interest? We seem to hear it all the time such as when we put money in the bank we can earn an “interest” rate on it or when you borrow money, you have to pay back the principal with “interest.” Well, simply put, “interest” is a percentage of money that one can earn on a set amount of money such as if you put $25.00 into a savings account at a bank, the bank may pay you a 2% interest rate on that $25.00 per month. Why would they do that? Simply put, your money doesn’t just sit there and do nothing.
The bank uses your money to make investments, including giving loans such as car loans or mortgages. Because you allow the bank to use your money, they pay you for the use of that money in the form of making interest payments to you.
The same thing happens when you borrow money. If you borrow money from a lender, which is also what you do when you use credit cards, the lender expects you to pay them for the use of that money so they assess a monthly interest amount. Say if you buy a car for $6,000.00, the bank may want you to pay an interest rate of 4% per month until you pay the lender back the entire $6,000.00.
There are two basic forms of interest, i.e., simple interest and compound interest. For this quiz you will only be dealing with simple interest.
Like with most math problems, there is a basic formula to follow in order to calculate the interest. For simple interest the formula is:
I = PRT (interest equals principal, interest rate and time)
The principal is the actual amount of money you borrow or put into a savings account. Let’s say you borrow $1,500.00. Your principal is 1,500.
Your interest rate is 3% which must then be put into a decimal form so 3% = .03.
The time is for how long you borrow the money and must pay it back. In this case, let’s say you borrow the money for 2 years.
Now we must multiply the principal with the interest rate and then with the time as follows:
1,500 x .03 x 2 =
1,500 x .03 = 45
45 x 2 = 90
Solution: The interest paid on $1,500.00 for 2 years at 3% is $90.00. In other words, you will have to pay the lender a total of $1,590.00 to pay off the amount borrowed.