Financial Literacy

Simple interest formula: $$I = P \times r \times t$$ where $I$ = Interest, $P$ = Principal (starting amount), $r$ = rate (as decimal), $t$ = time (in years).

Total amount: $$A = P + I = P(1 + rt)$$ Principal plus interest equals the total amount you'll have.

Example 1: $\$1000$ at $5\%$ for $3$ years. $I = 1000 \times 0.05 \times 3 = \$150$. Total = $\$1000 + \$150 = \$1150$.

Example 2: $\$500$ at $8\%$ for $2$ years. $I = 500 \times 0.08 \times 2 = \$80$. Total = $\$580$.

Rate conversion: Convert percentage to decimal by dividing by 100. $5\% = \frac{5}{100} = 0.05$, $8\% = 0.08$, $12\% = 0.12$.

Time conversion: Must be in years. For months, divide by 12. $6 \text{ months} = \frac{6}{12} = 0.5 \text{ years}$, $18 \text{ months} = 1.5 \text{ years}$, $3 \text{ months} = 0.25 \text{ years}$.

Simple vs. Compound: Simple interest is calculated only on the principal, not on previously earned interest. Compound interest (advanced) calculates interest on interest, growing faster over time.

Real-world: Simple interest is used for some loans and savings accounts. Understanding it helps you calculate how much you'll earn or owe!