What is Interest?

Discuss with a partner for 2 minutes!

What is Interest?It pays to save money (investments)The bank uses your money and pays you for that use – the bank pays you interest

It costs to borrow money (loans)You pay for the use of borrowed money – you pay interest

The interest is usually a percentage of the sum invested or borrowed called the interest rate (ex. 5% per annum or p.a.)

Simple Interest

Interest calculated on principal amount ONLY – remains the same every year:

There are 2 ways to calculate Simple Interest..

Simple InterestSally deposits €600 into an account with a rate of 5% per annum simple interest. Calculate the interest Sally receives in 5 years.

Method 1 Method 25% of €600 for 5 years

Simple Interest Worksheet