Simple Interest Word Problems

These lessons, with videos, examples and step-by-step solutions, help Algebra students learn how to solve word problems that involve interest.

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How to solve word problems using the simple interest formula?
The simple interest formula is
interest = principal × rate × time or I = Prt

How to use the Simple Interest Formula?

How much interest is earned in five years on $3,000 invested at an interest rate of 9% per year?

Interest Word Problems - Algebra Help
How to solve simple interest word problems?

Pam invested $5000. She earned 14% on part of her investment and 6% on the rest. If she earned a total of $396 for the year, how much did she invest at each rate?

Simple Interest Word Problems


  1. Find the amount of interest earned by $8,000 invested at a 5% annual simple interest rate for 1 year.

  2. To start a mobile dog-grooming service, a woman borrowed $2,500. If the loan was for 2 years and the amount of interest was $175, what simple interest rate was she charged?

  3. A student borrowed some money from his father at 2% simple interest to buy a car. If he paid his father $360 in interest after 3 years, how much did he borrow?

  4. A couple invested $6,000 of their $20,000 lottery winnings in bonds. How much do they have left to in stocks?

  5. A college student wants to invest the $12,000 inheritance he received and use the annual interest earned to pay his tuition cost of $945. The highest rate offered by a bank is 6% annual simple interest. At this rate, he cannot earn the needed $945, so he decided to invest some of the money in a riskier, but more profitable, investment offering a 9% return. How much should he invest at each rate?

  6. A credit union loaned out $50,000, part at an annual rate of 6% and the rest at an annual rate of 12%. The collected combined simple interest was $3600 that year. How much did the credit union loan out at each rate?

Suppose $7,000 is divided into two bank accounts. One account pays 10% simple interest per year and the other pays 5%. After three years there is a total of $1451.25 in interest between the two accounts. How much was invested into each account (rounded to the nearest cent)?

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