The formula for solving interest problems is: I=r x t x p

I= interest

R= rate

T= time

P= principal (what you started with originally)

To solve interest problems, you stick in the missing variable and solve.

Example:

A savings acount is set up so that the simple interest earned on the investment is moved into a separate checking account at the end of each year. If $4,000 is invested at 4.5%, what is the total simple interest accumulated in the checking account after three years?

                   I= r x t x p                             p= 4,000                t= 3                 r=4.5%  (.045)              I=?

                  4,000 x 3 x .045 = 540

540 is the answer, which is the interest.

Another Example:

When invested at an annual interest rate of 9.5%, an account earned $427.50 of simple interest in 1 year. How much money was originally invested in the account?

                 I= r x t x p                           

                p= ?                        t= 1           r= 9.5% (.095)                      I= 427.50

              .095x 1 x ? = 427.50      427.50/ .095x 1= 4500     p=4500

 Looks hard, huh? Once you understand the problems, it's easy!