In this section you will revise: simple interest, simple interest over multiple years, simple interest over a fraction of a year.
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.
Sally deposits £600 into an account with an interest rate of 5% per annum.
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
New balance = £600 + £30
After one year Sally will have £630.
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?
Interest = 4.3% of £850
= of £850
New balance = £850 + £36.55
The final balance after a year will be £886.55
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