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Maths I

Interest

# Simple interest over multiple years

If money is left in a bank or building society for more than one year, then the amount of interest earned has to increase.

Remember - this is simple interest. It is different from compound interest which is taught at Credit Level.

Here's an example of how to calculate simple interest over multiple years

## Example

Darren leaves £350 in his building society account for 3 years. The account paid interest at a rate of 8% per annum. How much does he have in his account after 3 years?

Interest for one year = 8% of £350

=

= £28

Interest for three years = 3 x £28

= £84

New balance = £350 + £84

= £434

After three years Darren will have £434 in his account.

### Now try this question:

Question

Morag earns 4.5% interest per year on the money she has saved in her bank account. She starts off with £200. How much is in her account after 5 years?

Interest for one year = 4.5% of £200

=

= £9

Interest for five years = 5 x £9

= £45

New balance = £200 + £45

= £245

After 5 years Morag will have £245.