Unit 1 - Compound Interest

Compound interest is when the interest is added on each year.
The formula used to work out compound interest is:

Where, P = the principle ammount (the amount invested),

and N = number of years.

Example:
£900 was placed in the bank for 2 years, at an interest rate of 4% p.a.
What was the total interest made after the 2 years??

Unit 1 - Simple Interest

When money is placed in a bank account it normally earns interest. The interest paid is a percentage of the amount deposited. (You may wish to use a calculator for Simple interest, a scientific calculator is best.)

1.) Susan invests £100 in the bank for 4 years, where simple interest was 7.5%.

=> Interest for 1 year = 7.5% x £100
                                 = £7.50

=> Simple interest for 4 years = 4 x £7.50
                                              = £30
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2.) Jack invests £2000 for 5 years at simple interest of 4% p.a (this means per annum/year)
     How much interest has he earned after the 5 years??
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3.) Mrs.Wilson invests £4500 for 9 years, with simple interest of 3.5% p.a.

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Answers:
2 -> £400
3 -> £1417

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