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Home > Maths I > Numbers and Money > Interest

Maths I

Interest

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In this section you will revise: simple interest, simple interest over multiple years, simple interest over a fraction of a year.

Simple interest

If you put money into a bank or building society they will pay you interest on this money.

If you have borrowed money, from a bank or building society for a mortgage or other loan, you have to pay them interest.

Simple interest is calculated on a yearly basis (annually) and depends on the interest rate. The rate is often given per annum (p.a.) which means per year.

Take a look at the Percentage revision bite if you need to brush up on percentages.

Example

Sally deposits £600 into an account with an interest rate of 5% per annum.

Teenage girl looking over the tabletop at some piles of pound coins.

Calculate the interest that Sally receives in one year and find how much money she has in the account after one year.

Interest = 5% of £600

 

= {5 \over 100} \times \pounds 600

 

= £30

New balance = £600 + £30

= £630

After one year Sally will have £630.

Now try this question:

Question

Jamie's bank account pays interest at a rate of 4.3% per year. If he puts £850 into his account, how much will Jamie have after a year?

Answer

Interest = 4.3% of £850

= {4.3 \over 100} of £850

 

= £36.55

New balance = £850 + £36.55

= £886.55

The final balance after a year will be £886.55

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