Question

What is the simple intrest of

250(1+.55)1

Answer 1

Simple Interest = $137.5

Explanation:

Here,

Principal, P = $250

interest rate, i = 55% = 0.55

number of year (period), n = 1

In this question, the equation is for compound interest. The compound interest formula is = PV(1+i)^n, where, PV = present value, i = interest rate, n = number of period. The difference between the simple interest and compound interest is that the first one is based on the principal. In contrast, the latter is based on the principal and the interest accumulated periodically. Therefore, the simple interest of this factor is -

Interest = Principal x interest rate x period

Interest = $250 x 0.55 x 1

Interest = $137.5