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Personal and Household Finance

Simple Interest
Formula used:
PRT
I =
100

I = Interest ($)
P = Principle ($)
R = Rate (%)
T = Time (Years)

Interest can be defined as the amount of money given or charged by


a bank or finance company based on the Principle
The money deposited or borrowed is called the Principle
The percentage interest is the given rate and money left or
borrowed for a fixed period of time
Time is the length of time the money left or borrowed
Examples:
1. Find the simple interest on $300 for 3 years at 5%?

2. How long will it take for $250 deposited at 8% to earn interest of


$80?

3. Qidah deposits $5 000 at Baiduri Bank for 2 years at an interest rate


of 5% per annum
a. How much interest does she earn at the end of the period?

b. How much does she earn in 2 years?


Compound Interest
Formula Used:
t
r
(
A= P 1 +
100 )

A = Compound amount, including the interest ($)


P = Principle ($)
r = Rate (value in decimal)
t = Time (years)

Compound Amount can be defined as the amount of money given or


charged by a bank or finance company based on the Principle, but;

o Compound Amount = Principle + Compound


Interest

Examples:
1. Rania puts $15 000 into a savings account where it earns 4% per
annum compound interest.
a. What is her investment worth after 2 years?

b. How much interest has she earned?

2. $1 200 are invested for three years at 6% compound interest


a. How much is the investment worth at the end of 3 years?

b. How much interest has been earned?


Questions from Exam Papers
1. Samantha invests $600 at a rate of 2% per year simple interest.
Calculate the interest Samantha earns in 8 years.

2. Luka has saved $350.


He invests this for 2 years at a rate of 4% per year compound
interest.
How much interest does he receive after 2 years?

3. Musa borrows $600 for 2 years at a rate of 7.5% per year compound
interest.
At the end of the 2 years she repays the amount owing in full.
Calculate the total amount she has to repay.
Give your answer correct to the nearest dollar.

4. Mrs Ali invests $200 000 for 3 years at a rate of 4% per year
compound interest.
Calculate the total amount of money she will have at the end of the
3 years.
Give your answer correct to the nearest dollar.

5. Acri invested $500 for 3 years at a rate of 2.8% per year compound
interest.
Calculate the final amount he has after 3 years.

6. Aminata borrows the $7 480 at a rate of 3.5 % per year compound


interest.
Calculate how much money she owes at the end of 3 years.
7. Two years ago $540 was put in a savings account to pay for the
holiday.
The account paid compound interest at a rate of 6% per year.
How much is in the account now?

8. Emily invests $x at a rate of 3% per year simple interest.


After 5 years she has $20.10 interest.
Find the value of x.

9. Bruce invested $800 at a rate of 3% per year simple interest.


Calculate the total amount he has after 6 years.

10. Sophie invests $450 at a rate of 1.5% per year simple interest.
Calculate the interest she earns after 8 years.

11. Prince Charming invests $3000 for 5 years at a rate of 4% per year
simple interest.
Calculate the total interest he will receive.

12. Mukthar has $1500 to invest in one of the following ways.

Account A paying simple interest at a rate of 4.1% per year


Account B paying compound interest at a rate of 3.3% per year

Which account will be worth more after 3 years and by how much?
13. Alex invests $200 for 2 years at a rate of 2% per year simple
interest.
Chris invests $200 for 2 years at a rate of 2% per year compound
interest.
Calculate how much more interest Chris has than Alex.

14. Edward invests $30.


He invests this money at a rate of r % per year, simple interest.
After 5 years he has a total amount of $32.25.
Calculate the value of r.

15. Mikael has a loan of $40 000 and pays 1.6% simple interest for three
months. How much the interest will he pay?