What is the simple interest on a $500 loan for 1 year at 6% annual rate?

What is the simple interest on a $500 loan for 1 year at 6% annual rate?

• A. $3,000.00
• B. $120.00
• C. $530.00
• D. $30.00

Answer: (D)

Simple interest is found by multiplying the principal by the annual rate and the time in years: I = P × r × t. Here that’s 500 × 0.06 × 1 = 30, so the interest after one year is $30. The other numbers would correspond to a larger interest (or the total amount repaid) and don’t match the one-year, 6% rate scenario.

Simple interest is found by multiplying the principal by the annual rate and the time in years: I = P × r × t. Here that’s 500 × 0.06 × 1 = 30, so the interest after one year is $30. The other numbers would correspond to a larger interest (or the total amount repaid) and don’t match the one-year, 6% rate scenario.