Simple Interest (Cambridge (CIE) IGCSE Maths) : Revision Note

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

Examiner Tips and Tricks

  • Double check:

    • Does the question ask for the interest earned, or the total amount at the end?

    • Do you need to round your answer? (e.g. to the nearest hundred)

Worked Example

A bank account offers simple interest of 4% per year. Nigel puts $ 250 into this bank account, and leaves it to earn interest for 6 years.

(a) Find the total amount of interest earned over the 6 year period.

Each year, 4% of the starting amount is added as interest
Find 4% of $ 250 using a multiplier

0.04 × 250 = 10

This amount of interest is earned every year, for 6 years

10 × 6 = 60

$ 60 of interest is earned 

(b) Find the total amount in the bank account at the end of the 6 year period.

Add the amount of interest earned, found in part (a), to the starting amount

250 + 60 = 310

$ 310

Worked Example

Noah invests £ 9000 at a rate of n percent sign 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.

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

540 over 9000 equals 0.06 equals 6 percent sign

£ 540 is 6% of the original £ 9000

bold italic n bold equals bold 6

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Jamie Wood

Author: Jamie Wood

Expertise: Maths Content Creator

Jamie graduated in 2014 from the University of Bristol with a degree in Electronic and Communications Engineering. He has worked as a teacher for 8 years, in secondary schools and in further education; teaching GCSE and A Level. He is passionate about helping students fulfil their potential through easy-to-use resources and high-quality questions and solutions.

Dan Finlay

Reviewer: Dan Finlay

Expertise: Maths Lead

Dan graduated from the University of Oxford with a First class degree in mathematics. As well as teaching maths for over 8 years, Dan has marked a range of exams for Edexcel, tutored students and taught A Level Accounting. Dan has a keen interest in statistics and probability and their real-life applications.

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