Simple Interest — Practice Quiz

A Financial Math cheat sheet for Simple Interest — every key formula with its symbols defined — plus a medium-level practice quiz to test recall.

Formulas & key concepts

Simple interest earned, calculated only on the original principal. Here \(I\) is the total interest, \(P\) the principal (present value), \(r\) the annual nominal rate written as a decimal, and \(t\) the time in years.

$$I = P \times r \times t$$

The ending balance (future value) under simple interest. \(A\) is the future value, \(P\) the principal, \(r\) the annual rate, and \(t\) the time in years.

$$A = P(1 + rt)$$

The principal that grows to a given future value \(A\) under simple interest, where \(r\) is the annual rate and \(t\) the time in years.

$$P = \dfrac{A}{1 + rt}$$

Practice quiz

  1. A principal of $1000$ is invested at an annual simple interest rate of $5\%$ for $3$ years. What is the total simple interest earned?

    • $150$
    • $50$
    • $100$
    • $200$

    Answer: $150$

  2. An initial investment of $5000$ earns simple interest at a rate of $4\%$ per year. What will be the future value of the investment after $6$ years?

    • $5240$
    • $6200$
    • $6000$
    • $5000$

    Answer: $6200$

  3. What principal amount must be invested today at a simple interest rate of $2.5\%$ per year to accumulate $1200$ in $4$ years?

    • $1090.91$
    • $1100.00$
    • $1200.00$
    • $1000.00$

    Answer: $1090.91$

  4. A loan of $2000$ accumulates $300$ in simple interest over $2.5$ years. What is the total amount to be repaid at the end of the term?

    • $2000$
    • $2300$
    • $2500$
    • $2150$

    Answer: $2300$

  5. If $800$ is invested for $5$ years and earns $160$ in simple interest, what is the annual simple interest rate?

    • $2\%$
    • $4\%$
    • $5\%$
    • $8\%$

    Answer: $4\%$

  6. How many years will it take for an investment of $3000$ to grow to $3600$ at a simple interest rate of $5\%$ per year?

    • $3$ years
    • $4$ years
    • $5$ years
    • $6$ years

    Answer: $4$ years

  7. Which investment yields more simple interest? Investment X: $1000$ at $6\%$ for $2$ years. Investment Y: $1200$ at $5\%$ for $1.5$ years.

    • Investment X
    • Investment Y
    • Both yield the same interest
    • Cannot be determined

    Answer: Investment X

  8. An investor wants to have $15000$ in $10$ years. If the simple interest rate is $3\%$ per year, how much interest will be earned on the initial principal?

    • $3461.54$
    • $4500.00$
    • $11538.46$
    • $15000.00$

    Answer: $3461.54$

  9. In the simple interest formula $I = P \times r \times t$, what does the variable $P$ represent?

    • The total interest earned
    • The annual interest rate
    • The time in years
    • The principal amount (initial investment)

    Answer: The principal amount (initial investment)

  10. A bank offers a simple interest rate of $2\%$ per year. If you deposit $2500$ today, and then deposit an additional $1000$ after $3$ years, what will be your total balance after $5$ years from the initial deposit?

    • $3750$
    • $3790$
    • $3800$
    • $3850$

    Answer: $3790$

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