YOU ARE LEARNING:
Simple interest is a method of percentage increase or decrease. It is called simple because the same percentage of an original value is added on over time.
Interest is when a percentage of an original amount is added on. This is great when your bank gives you interest on your savings, but not so good when you incur interest on a loan - because then you owe more money!
There are two types: SIMPLE and COMPOUND interest.
Simple interest occurs when a percentage of the original amount only is added. That means that the same amount of interest is added each time.
You invest £200 into a savings account which pays 2% simple interest per year. How much will you have in the account at the end of 5 years?
The goal here is to find the amount of interest paid each year, and add it on to the original amount of £200
What is simple interest?
Let's have a go!
You invest £200 into a savings account which pays you 2% simple interest per year. How much will you have in the account at the end of 5 years?
Convert 2% to a decimal
Find the interest in one year by multiplying the original amount
One year's interest is £4. How much interest do you earn over 5 years?
Over 5 years, we have £20 in interest. Add this on to the original amount.
After 5 years, there will be £220 in the account!
Imagine that you borrow £500 to buy a TV. You have to pay 4% simple interest per year. If you do not pay back any money for 4 years, how much will you owe?
You invests £3000 into a bank account paying 5% simple interest. How much will you have after 3 years?