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57 2
1
Interest
Simple Interest
Interest is the amount earned on money that is invested or the amount that is charged on money which is borrowed (Loaned).
It is normally expressed as a percentage of the amount of money that is either invested or loaned.
Example Question 1If £400 is invested at a 5% interest rate how much interest is earned each year?
5% of £400 = 5
100
x 400 = £20
Example Question 2A one year loan of £650 is to be paid back at 8% interest. How much interest is paid on the loan?
8% of £650 = 8
100
x 650 = £52
Simple Interest
Interest is the amount earned on money that is invested or the amount that is charged on money which is borrowed (Loaned).
It is normally expressed as a percentage of the amount of money that is either invested or loaned.
Question 1
If £900 is invested at a 4% interest rate how much interest is earned each year?
4% of £900 = 4
100
x 900 = £36
Question 2
A one year loan of £480 is to be paid back at 9% interest. How much interest is paid on the loan? (nearest £).
9% of £480 = 9
100
x 480 = £43
SI
Simple InterestSimple interest is calculated only on the initial money invested. This money is called the principal (P) and it is invested at rate (R) over a period of time (T).If you build up interest in your account each year then you do not get interest on any interest payments that may have been credited to your account.In most cases money invested earns “interest on the interest” as well. This is called compound interest.
£33.10£30.00Total Interest gained
£133.10£130Amount after 3years
£121£120Amount after 2 years
£110£110Amount after 1 year
Compound InterestSimple Interest
The table below shows how £100 grows over a 3 year period if it is invested at a rate of 10%
Simple interest calculations can be useful in giving you a rough idea of how much interest you earn without doing a more complicated “compound calculation” as demonstrated in the table below.
Simple Interest
The formula below can be used to calculate simple interest.
P x R x T100
I = = P R T100
I = Interest
P = Principal
R = rate of interest T = time in
years.Example Question
1Find the simple interest earned when £600 is invested for 2 years at an annual interest rate of 4%.
I = PRT100
=
600 x 4 x 2100
= £48
Simple Interest
The formula below can be used to calculate simple interest.
P x R x T100
I = = P R T100
I = Interest
P = Principal
R = rate of interest T = time in
years.Example Question
2Find the simple interest earned when £2000 is invested for 5 years at an annual interest rate of 4½%.
I = PRT100
=
2000 x 4.5 x 5100
= £450
Simple Interest
The formula below can be used to calculate simple interest.
P x R x T100
I = = P R T100
I = Interest
P = Principal
R = rate of interest T = time in
years.Example Question
3Find the simple interest earned when £3500 is invested at an annual interest rate of 4¾% for 6½ years (nearest £)
I = PRT100
=
3500 x 4.75 x 6.5100
= £1081
Simple Interest
P x R x T100
I = = P R T100Question
1Find the simple interest earned when £500 is invested for 3 years at an interest rate of 6%. (nearest £)
I = PRT100
=
500 x 6 x 3100
= £90
Question 2
Find the simple interest earned when £1500 is invested for 2½ years at an annual interest rate of 4½%. (nearest £)
I = PRT100
=
1500 x 4.5 x 2.5100
= £169
Simple Interest
P x R x T100
I = = P R T100Question
3Find the simple interest earned when £7500 is invested at an interest rate of 5¼% for 4½ years. (nearest £).
I = PRT100
=
7500 x 5.25 x 4.5100
= £1772
Question 4
I = PRT100
=
2400 x 4.75 x 3.5100
= £400
Find the simple interest earned when £2400 is invested at an annual interest rate of 4¾% for 3½ years. (nearest £10).
Months
Simple Interest
The formula below can be used to calculate simple interest.
P x R x T100
I = = P R T100
I = Interest
P = Principal
R = rate of interest T = time in
years.Example Question
4Find the simple interest earned when £1800 is invested at an annual interest rate of 5% for 18 months (nearest £).
I = PRT100
=
1800 x 5 x 1.5100
= £135
Simple Interest
The formula below can be used to calculate simple interest.
P x R x T100
I = = P R T100
I = Interest
P = Principal
R = rate of interest T = time in
years.Example Question
5Find the simple interest earned when £2750 is invested for 30 months at an annual interest rate of 5¾% (nearest £).
I = PRT100
=
2750 x 5.75 x 2.5100
= £395
Simple Interest
The formula below can be used to calculate simple interest.
P x R x T100
I = = P R T100
I = Interest
P = Principal
R = rate of interest T = time in
years.Example Question
6Find the simple interest earned when £4300 is invested for 9 months at an annual interest rate of 4½% (nearest £).
I = PRT100
=
4300 x 4.5 x 0.75100
= £145
Simple Interest
P x R x T100
I = = P R T100Question
5Find the simple interest earned when £2500 is invested at an interest rate of 3¼% for 42 months. (nearest £).
I = PRT100
=
2500 x 3.25 x 3½ 100
= £284
Question 6
I = PRT100
=
6500 x 5.75 x 1.25100
= £467
Find the simple interest earned when £6500 is invested at an annual interest rate of 5¾% for 15 months.
(nearest £10).
Simple Interest
P x R x T100
I = = P R T100Question
7Find the simple interest earned when £350 is invested for 3 months at an interest rate of 2¼% (nearest £).
I = PRT100
=
350 x 2.25 x 0.25100
= £2
Question 8
Find the simple interest earned when £1750 is invested for 51 months at an annual interest rate of 4¾% (nearest £).
I = PRT100
=
1750 x 4.75 x 4.25100
= £353
Example Question 1
If £400 is invested at a 5% interest rate how much interest is earned each year?
Example Question 2
A one year loan of £650 is to be paid back at 8% interest. How much interest is paid on the loan?
Question 1
If £900 is invested at a 4% interest rate how much interest is earned each year?
Question 2
A one year loan of £480 is to be paid back at 9% interest. How much interest is paid on the loan? (nearest £).
InterestWorksheet 1
Worksheets
Simple Interest 1Worksheet 2
Example Question 1Find the simple interest earned when £600 is invested for 2 years at an annual interest rate of 4%.
Example Question 2
Find the simple interest earned when £2000 is invested for 5 years at an annual interest rate of 4½%.
Example Question 3
Find the simple interest earned when £3500 is invested at an annual interest rate of 4¾% for 6½ years (nearest £)
Question 1
Find the simple interest earned when £500 is invested for 3 years at an annual interest rate of 6%. (nearest £)
Question 2
Find the simple interest earned when £1500 is invested for 2½ years at an annual interest rate of 4½%. (nearest £)
Question 3
Find the simple interest earned when £7500 is invested at an annual interest rate of 5¼% for 4½ years. (nearest £).
Question 4
Find the simple interest earned when £2400 is invested at an annual interest rate of 4¾% for 3½ years. (nearest £10).
Simple Interest 2Worksheet 3
Example Question 4Find the simple interest earned when £1800 is invested at an annual interest rate of 5% for 18 months (nearest £).
Example Question 5
Find the simple interest earned when £2750 is invested for 30 months at an annual interest rate of 5¾% (nearest £).
Example Question 6
Find the simple interest earned when £4300 is invested for 9 months at an annual interest rate of 4½% (nearest £).
Question 5
Find the simple interest earned when £2500 is invested at an annual interest rate of 3¼% for 42 months. (nearest £).
Question 6
Find the simple interest earned when £6500 is invested at an annual interest rate of 5¾% for 15 months. (nearest £10).
Question 7
Find the simple interest earned when £350 is invested for 3 months at an annual interest rate of 2¼% (nearest £).
Question 8
Find the simple interest earned when £1750 is invested for 51 months at an annual interest rate of 4¾% (nearest £).