Simple Interest

Simple Interest

GCSE(F),

Simple Interest is always calculated as a percentage of the original amount.

Simple Interest is calculated over a fixed period, such as a month, or a year. If multiple periods are involved, then the total interest is a multiple of the interest amount for one period.

Examples

1. Jacob has £150 in an account earning 2.5% simple interest per annum (each year). How much interest does he earn over 4 years?

Answer: £15.00

In one year he earns `150 xx frac(2.5)(100)` = £3.75

Over four years, 4 x 3.75 = £15.00

2. Robyn earned £24 in simple interest from her savings over 6 years. If the interest rate was 2.5%, what was her original investment?

Answer: £160.00

Amount earned in interest each year is 24 ÷ 6 = £4.00

Interest earned is given by `4 = text(amount) xx frac(2.5)(100)`

4 x 100 ÷ 2.5 = amount

= 160