Interest Formula - Months

Solving for the unknown factor for the formula when time is stated in whole months: PXRXT=I P = Principle (The amount borrowed before interest) R = Rate (stated as a one year rate) T = Time (for this handout we will state time in “months/12”) I = Interest (Cost to borrow money from another entity) This box has the basic formula:

Interest

Principle

Rate

Time

MJC Revised 1/2012

Page 1

Interest Formula - Months
This box shows the basic formula to find principle:

Interest

Principle Rate Time

Example: Cindy borrows money with a rate of 5% for six months with an interest of $125. Cindy’s principle will be $5,000.

MJC Revised 1/2012

Page 2

Interest Formula - Months
This box shows the basic formula to find rate:

Interest

Principle Rate Time

Example: Cindy borrows money with a principle of $5,000 for six months with an interest of $125. Cindy’s rate will be 5%.

MJC Revised 1/2012

Page 3

Interest Formula - Months
This box shows the basic formula to find time:

Interest

Principle Rate Time

Example: Cindy borrows money with a principle of $5,000, a rate of 5% and with an interest of $125. Cindy’s time will be 6 months.

Note: When time is less than 1 multiply it by 12 months to get the number of months.
MJC Revised 1/2012 Page 4

Interest Formula - Months
This box shows the basic formula to find interest:

Interest

Principle Rate Time

PXRXT=I
Example: Cindy borrows money with a principle of $5,000, a rate of 5% and with a time of six months. Cindy’s interest will be $125.

$5,000 X 5% X 6/12 = I $5,000 X 5%X .5 = I $250 X .5 = $125
Note: In order to get .5 for the time you must divide 6 by 12 which will then results in .5 as the answer.

MJC Revised 1/2012

Page 5

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