Money paid for the use of money is called interest.

The sum of money for the use of which interest is paid is called the principal.

The sum of the principal and the interest is called the amount. Interest is a certain per cent of the principal.

The rate of interest is the per cent of the principal paid for the use of money for a given time. The rate of interest in all problems is for one year, unless otherwise specifically stated. Thus, 6% interest means 6% of the principal for one year.

The legal rate of interest varies from 6% to 12% in the different states. In most states, including New York, it is 6%. That is, the law allows one to charge as much as 6% interest, but no more.

To find the interest.

Example 1: Find the interest on $500 for 2 yr. at 4%.

Example 2: Find the interest on $1000 for 3 mo. at 4%.

To find the interest for years, months, and days.

In computing simple interest, a month is regarded as 30 days, and a year as 360 days.

Example: Find the interest on $500 for 1 yr. 6 mo. 15 da. at 4%.

CANCELLATION METHOD

WORK

Since rate principal=interest for 1 yr., reduce the given time to years and then multiply the interest for 1 yr. by the given number of years. 360 da.

1 yr.

=

= $30.83, interest, Ans.

Find the interest to the nearest cent, discarding less than ¢ and counting an extra cent for or a greater fraction of a cent. Write figures carefully and neatly. Check all work.

Find the interest on the following:

[With pencil]