Which formula correctly calculates simple interest?

Which formula correctly calculates simple interest?

• A. Principal x Rate x Time
• B. Principal + (Rate / Time)
• C. Principal - (Rate x Time)
• D. Principal / Rate x Time

Answer: (A)

The formula for calculating simple interest is determined by multiplying the principal amount by the interest rate and then by the time period for which the money is borrowed or invested. This makes the correct formula Principal x Rate x Time. In this context, the principal is the initial amount of money that is subject to interest, the rate reflects the percentage of interest charged or earned, and time typically represents the duration the money is invested or loaned, often expressed in years. The result provides the total interest accumulated over that time. The other options do not align with the principles of calculating simple interest. The second option divides the rate by time, which does not factor in the accumulation of interest properly. The third option subtracts a value from the principal, which does not correspond to interest calculation but rather suggests a decrease in capital. The fourth option incorrectly divides the principal by the rate, which again does not relate to how interest is typically calculated in financial contexts. Understanding the correct formula is essential for accurately computing interest in various financial scenarios.

The formula for calculating simple interest is determined by multiplying the principal amount by the interest rate and then by the time period for which the money is borrowed or invested. This makes the correct formula Principal x Rate x Time.

In this context, the principal is the initial amount of money that is subject to interest, the rate reflects the percentage of interest charged or earned, and time typically represents the duration the money is invested or loaned, often expressed in years. The result provides the total interest accumulated over that time.

The other options do not align with the principles of calculating simple interest. The second option divides the rate by time, which does not factor in the accumulation of interest properly. The third option subtracts a value from the principal, which does not correspond to interest calculation but rather suggests a decrease in capital. The fourth option incorrectly divides the principal by the rate, which again does not relate to how interest is typically calculated in financial contexts. Understanding the correct formula is essential for accurately computing interest in various financial scenarios.