Question

When calculating simple interest, what must you do if you want to invest for months or weeks instead of years?

a.
Simple interest only pays yearly, so you should find another investment.
b.
The simple interest calculation does not use those units, so you should just calculate as normal.
c.
The units have changed, so the interest formula switches to I·t=P·r.
d.
Interest rates are annual, so you must convert the units into years.

Answer 1

To calculate simple interest for months or weeks instead of years, adjust the units in the formula by multiplying the time period in years by a fraction representing the number of months or weeks. Then use the formula I = P · t · r.

The correct option is c.

Step-by-step explanation:

When calculating simple interest for months or weeks instead of years, you need to adjust the units in the formula.

The interest formula switches to I·t=P·r, where I is the interest, t is the time period in years, P is the principal amount, and r is the interest rate.

For example, if you want to calculate the interest for 6 months on a $500 investment with an annual interest rate of 4%, you would use the formula:

I = $500 · (6/12) · 0.04 = $10