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Videos, worksheets, solutions, and activities to help Algebra students learn how to solve word problems that involve interest.

The simple interest formula is

interest = principal × rate × time or I = Prt

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

How to solve simple interest word problems?

Example: 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?

Examples:

(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?

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