Step by step
The question
Question: Sara puts $500 in a bank at 4% simple interest per year.
How much money will she have after 3 years?
1 Find what we know
What do we know?
The money put in: $500.
The rate: 4% each year.
The time: 3 years.
What do we want?
All the money at the end.
2 Name the unknown
We don't know the interest.
So we call it x.
4% means 4 out of 100: 4/100.
Here is the rule for it.
Interest = money put in, times the rate, times the years.
In short: I = P × r × t.
Interest is extra money for using money.
Simple interest is the same amount every year.
3 Write the equation
In words: the money put in, times the rate, times the years, makes the interest.
So the equation is x = 500 × 4/100 × 3.
Now we solve it.
4 Multiply the numbers we know
Cancel first.
500 and 100 can both be divided by 100.
500 becomes 5, and the 100 is gone.
Write what is left.
Multiply: 5 times 4 times 3 is 60.
So x = 60!
5 Answer the question
All the money: the $500 put in, plus $60 interest, is $560.
Careful!
The interest alone is not the answer.
The question asks for all the money: the money put in, plus the interest.
So there is $560 at the end.
6 Check
Let's check in the story.
In 1 year: 4/100 of $500 is $20.
3 years: $60 of interest.
Plus the money put in: $560.
Does it make sense?
The interest is less than the money put in.
That makes sense for 4% a year.
So the answer is right!
Let's look back.
First: find what we know.
Then: name the unknown.
Then: write the equation.
Then: solve it.
Then: answer the question.
Last: check.