Banking · Video Lesson
What is Simple Interest? How to Calculate
Simple interest is the most basic way interest is calculated on savings and loans. This lesson introduces principal, rate, and time, teaches the simple interest formula (I = P × R × T), and gives students practice calculating interest on everyday examples.
For Teachers
Lesson at a glance
- Topic
- Banking & Money Math
- Grade Level
- Grades 6–12
- Resource Type
- Video Lesson + Worksheet
- Estimated Time
- 30–45 minutes
- Format
- Direct instruction + practice
- Materials
- Video, worksheet, calculators, whiteboard
What Students Learn
Learning objectives
- Define simple interest and explain when it applies to saving and borrowing
- Identify the principal, interest rate, and time in a problem
- Convert a percentage rate to a decimal for calculation
- Apply the simple interest formula I = P × R × T
- Recognize that real loans and savings may use more complex (compound) methods
Video Lesson
Watch: What is Simple Interest? How to Calculate
Materials
What you’ll need
- Internet access for the video
- Printed copies of the worksheet (one per student)
- Calculators
- Whiteboard or projector to work examples
Key Terms
Vocabulary
- Simple interest
- Interest calculated only on the original principal, at the same rate each period.
- Principal
- The original amount of money saved or borrowed.
- Interest rate
- The percentage charged or paid per period, usually per year.
- Time
- How long the money is borrowed or invested, used in the interest formula.
- Amount
- The principal plus the interest owed or earned.
- Decimal rate
- A percentage rewritten for calculation, e.g., 6% = 0.06.
For Teachers
Lesson plan
Estimated time: one 30–45 minute class period.
Lesson sequence
- Introduction (5 min). Ask: if a bank pays you interest, or a loan charges you interest, how is that number figured out? Introduce simple interest.
- Watch the video (8 min). Play the lesson video. Ask students to note the formula and the three terms in it.
- The formula (12 min). Teach I = P × R × T, defining principal, rate (as a decimal), and time. Work the example: a $10,000 loan at 6% for 1 year → 10,000 × 0.06 × 1 = $600.
- Guided practice (8 min). Work two more examples together, varying the rate and time.
- Worksheet (8 min). Students complete the worksheet, calculating simple interest on their own.
Extension
- Simple vs. more. Briefly note that many real loans and savings use compounding, so the simple formula is a starting point — a bridge to a later compound-interest lesson.
Assessment
Assess the worked examples and the completed worksheet calculations.
Discussion
Discussion questions
- In your own words, what does simple interest calculate?
- What are the three quantities in the formula I = P × R × T?
- How do you turn an interest rate like 6% into the number you multiply by?
- If you doubled the time on a loan, what would happen to the simple interest?
- Why might the interest you actually pay differ from the simple-interest figure?
Printable Worksheet
Simple Interest — Practice Worksheet
Short-answer practice worksheet based on the video for students to calculate simple interest.
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