Simple Interest Flashcards

All 6 cards in this deck

What is simple interest?

Interest calculated only on the original amount (the principal), so the same amount of interest is paid each year.

What is the formula for the total simple interest earned?

e.g. £3500 invested for 6 years at 2.5% per year

$\text{Interest} = \dfrac{P \times R \times T}{100}$

$\dfrac{3500 \times 2.5 \times 6}{100} = £525$

How do you find the total amount in an account after simple interest?

e.g. £2000 for 4 years at 3% simple interest per year

Add the total interest to the principal.

$2000 + (4 \times 60) = £2240$

What are the steps to work out the annual rate of simple interest from the total interest?

e.g. £600 invested for 5 years gives £75 total simple interest

1. Divide the total interest by the number of years: $75 \div 5 = £15$ per year
2. Divide by the principal: $15 \div 600 = 0.025$
3. Multiply by 100: rate $= 2.5\%$

How do you find the number of years an amount was invested, given the total simple interest?

e.g. £500 at 2% per year gives £50 total interest

Divide the total interest by one year's interest.

One year $= £10$, so $50 \div 10 = 5$ years

True or false? With simple interest, the same amount of interest is added every year.

True. The interest is always worked out on the original amount only.