Simple Interest Calculation

Introduction

• Simple Interest: A method to calculate interest where the interest is a percentage of the original amount (principal) for each year it is borrowed.

Example Scenario

• Principal: £200
• Interest Rate: 3% per year

Calculation for One Year

• Convert percentage to decimal:
  • 3% = 0.03
• Calculate interest for one year:
  • (0.03 \times 200 = 6) pounds
• Total amount owed after one year:
  • £200 (original) + £6 (interest) = £206

Calculation for Two Years

• Interest for second year: £6
• Total amount owed after two years:
  • £206 + £6 = £212

Calculation for Ten Years

• Interest per year: £6
• Total interest for ten years:
  • (10 \times 6 = 60) pounds
• Total amount owed after ten years:
  • £200 (original) + £60 (interest) = £260

Another Example Problem

• Scenario: Dora invests £600 for six years at 2.1% interest per year
• Convert percentage to decimal:
  • 2.1% = 0.021
• Calculate annual interest:
  • (0.021 \times 600 = 12.60) pounds per year
• Total interest for six years:
  • (6 \times 12.60 = 75.60) pounds
• Total amount after six years:
  • £600 (original) + £75.60 (interest) = £675.60

Conclusion

• Understanding how simple interest is calculated helps in financial planning and investment decisions.
• Practice calculations with different scenarios to reinforce learning.