Simple interest is calculated solely on the amount initially invested. This calculator can help you deal with many different kinds of simple interest problems. The calculator prints an easy-to-follow, step-by-step explanation.
problem
You deposit $1000 into a bank account and received $50 simple interest after 3 months. What had been the interest rate?
solution
The interest rate was 20% per year.
explanation
STEP 1: Convert 3 months into years.
$$ \text{ 3 months } = \frac{ 3 }{12} \text{ years} = 0.25 \text{ years}$$STEP 2: Find the interest rate by using the formula $ I = P \cdot i \cdot t $, where I is interest, P is total principal, i is rate of interest per year, and t is total time in years.
In this example I = $50, P = $1000 and t = 0.25 years, so
$$ \begin{aligned} I &= P \cdot i \cdot t \\ i &= \frac{I}{P \cdot t} \\ i &= \frac{ 50 }{ 1000 \cdot 0.25} \\ i &= 0.2 = 20\% \text{ per year} \end{aligned}$$Please tell me how can I make this better.