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Simple Interest

A method of computing interest. Interest is computed from the (original) principal alone no matter how much money has accrued so far.

 Formula:     A = P(1 + nr)      A = final amount      P = principal, or original amount      n = number of years      r = rate of interest per year Example: $2,000 is deposited in an account paying 12% per year. Find the balance after 7 years using simple interest. Solution: P =$2,000, r = 0.12, and n = 7 A = $2,000(1 + 7·0.12) =$3,680