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Home > Maths I > Numbers and Money > Interest

Maths I

Interest

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Simple interest over a fraction of a year

If money is not left in a bank account for a whole year then only a fraction of the interest gets paid.

Example

Find the interest that Damon earns on £40 if he keeps it in the bank, paying 8.5% interest p.a., for 6 months.

Interest for one year = 8.5% of £40

Catroon man holding up a big percentage symbol.

= {8.5 \over 100} \times \pounds 40

 

= £3.40

Interest for 6 months = {1 \over 2} of £3.40

= £1.70

New balance = £40 + £1.70

= £41.70

Damon will earn £1.70 in interest

Try this:

Question

Eliza has £560. She deposits it in a bank account that pays 3.7% interest per annum. She leaves it in the bank for 2 months. How much money does Eliza have now?

Answer

Interest for one year = 3.7% of £560

= {3.7 \over 100} \times \pounds 560

 

= £20.72

Interest for 2 months = {1 \over 6 } of £20.72

= £3.45 (rounding down, to the nearest pence.)

New balance = £560 + £3.45

= £563.45

After 2 months Eliza has £563.45.

If you made any mistakes work through the examples again before you try the Test Bite.

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