Simple Interest (Cambridge O Level Maths)

What is simple interest?

• Interest is extra money added every year (or month) to an original amount of money
• Simple interest is interest that is the same amount each time
  • It can be good: for example, putting £100 into a bank account and the bank rewarding you with simple interest of 10% every year
    • After one year you’d have £110, after two years you’d have £120, …
  • It can be bad: for example, owing £100 to a friend and they charge you simple interest of 10% for every year you don’t pay them back
    • After the first year you’d owe them £110, after the second year you’d owe them £120, …
• If £P is your initial amount of money and simple interest is added to it at a rate of R% per year for T years, then the total amount of interest gained, £I, is given by the formula 

• Remember that this formula calculates the amount of simple interest added over T years, not the total amount of money after T years
  • To find the total amount of money after T years, add the interest £I to the original amount £P