Simple interest is interest earned on the principal only. In other words, interest income will be distributed to investors and no further interest will be earned from interest income. The equation for finding simple interest is:

A = P + ( P ´ r ´ t )

where

A = total amount in account
P = principal
r = annual interest rate (decimal)
t = number of years (time)

Ben put $1,000 in the bank for 6 months at a 10% interest rate. Find how much money will he have in his account at the end of six months.

A = P + (P ´ r ´ t)
A = 1,000 + (1,000 ´0.1 ´ 0.5)
A = 1,000 + (100 ´ 0.5)
A = 1,000 + 50
A = $1,050

The amount of money Ben will have in his account at the end of six months is $1,050.

Paul invested $10,000 in the Treasury bills at a 6% interest rate. How much money will he have at the end of one year?

Estimate the answer:

Less than $11,000
Between $11,000 and $15,000
Over $15,000