Simple Interest

Exam code: 4024

Written by: Ashika|Reviewed by: Caroline Carroll|Updated 2 July 2026

Simple Interest

What is simple interest?

Interest is money that is regularly added to an original amount of money
- This could be added yearly, monthly, etc
- When saving money, interest helps increase the amount saved
- With debt, interest increases the amount owed
Simple interest refers to interest which is based only on the starting amount
- Each interest payment (or charge in the case of debt) will be the same

How do I calculate simple interest?

To find the total simple interest earned
- Find a percentage (the percentage rate) of the starting amount
  - Use a multiplier to do this (e.g. 0.05 to find 5%)
- Multiply this by the number of time periods (e.g. years) it is being applied for
To find the total balance after the simple interest has been earned
- Use the same method as above, and add this on to the starting amount

Worked example

Noah invests £ 9000 at a rate of $n %$ simple interest per year, for 5 years. At the end of 5 years there is £ 11 700 in the account. Find the value of $n$ .

Answer:

Find the total amount of interest earned over the 5 years

11 700 - 9 000 = £ 2 700 total interest

As we are dealing with simple interest, the same amount of interest is earned each year
Find the interest earned each year

2 700 ÷ 5 = £ 540 interest per year

Find what percentage of the original amount this represents

$\frac{540}{9000} = 0.06 = 6 %$

£ 540 is 6% of the original £ 9000

$n = 6$

Simple Interest

Simple Interest

What is simple interest?

How do I calculate simple interest?

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