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Home > Maths I > Numbers and Money > Interest

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

= {8 \over 100} \times \pounds 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?

Answer

Interest for one year = 4.5% of £200

= {4.5 \over 100} \times \pounds 200

 

= £9

Interest for five years = 5 x £9

= £45

New balance = £200 + £45

= £245

After 5 years Morag will have £245.

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