Simple interest

Objective. Calculate simple interest over several years.

1. Learn
2. Worked example
3. Practice
4. Feedback
5. Continue

Learn: the key idea

Simple interest is money earned or paid on a loan or investment, calculated each year as a fixed percentage of the original amount only, not on any interest already earned. The formula is I = (P × R × T) ÷ 100, where P is the principal (starting amount), R is the annual rate as a percentage, and T is the time in years. For example, £500 invested at 4% simple interest for 3 years earns the same £20 interest every year, totalling £60. The total amount after T years is the principal plus the total simple interest earned.

Worked example

Calculate the simple interest earned on £800 invested at 5% per year for 4 years.

1 $Identify the values: P = £800, R = 5, T = 4$
2 $Apply the formula: I = (800 \times 5 \times 4) \div 100$
3 $Simplify the numerator: 800 \times 5 \times 4 = 16000$
4 $Divide by 100: £160$

Answer: £160

Concept mastery

Based on your past attempts at this lesson — the question types to practise again come first.

Complete a practice set to see your concept breakdown here.

Practice

Practice happens on its own screen, one question at a time. Answers stay hidden until you submit yours, and you can stop and pick up at the same question later.

Start practising

Common mistake. Pupils sometimes recalculate the percentage on the growing total each year as if it were compound interest, instead of applying the rate to the original principal every year, which overstates the interest earned under simple interest.

Your progress

Tick each step as you finish it. Your exact reading position is saved automatically, so Continue drops you back on the same line.

0 of 5 steps complete

Your place saves automatically as you read.

My dashboard