Simple Interest and Problems Involving Saving
Primary 6 · Mathematics
Simple Interest and Problems Involving Saving
Lesson 1 of 5
15 min
Let's begin
Keza saves 20 000 Frw in her family's Umurenge SACCO account. One year later she checks her balance and finds 21 000 Frw. She did not put in any more money. Where did the extra 1 000 Frw come from?
The SACCO paid her interest: a reward for letting it keep and use her money. In this lesson you will learn to calculate interest yourself.
With simple interest, the interest is worked out on the original principal only, so you get the same amount of interest every year. The formula is:
I = P × R × T ÷ 100
We divide by 100 because the rate is a percentage. (Some books write I = Prt with the rate as a decimal, such as 5% = 0.05. It is the same calculation.)
Worked example 1
Keza: P = 20 000 Frw, R = 5%, T = 1 year.
I = 20 000 × 5 × 1 ÷ 100 = 100 000 ÷ 100 = 1 000 Frw. That is the extra 1 000 Frw.
Worked example 2
Mugisha saves 50 000 Frw at 8% per year for 3 years.
I = 50 000 × 8 × 3 ÷ 100 = 1 200 000 ÷ 100 = 12 000 Frw.
Check year by year: each year he earns 8% of 50 000 = 4 000 Frw, and 3 × 4 000 = 12 000 Frw.
Worked example 3
(a loan). Habimana borrows 120 000 Frw at 15% per year for 2 years to start a small shop.
I = 120 000 × 15 × 2 ÷ 100 = 36 000 Frw. This is what the loan costs him.
The rate is per year, so change months into years: T = number of months ÷ 12. For example, 6 months = 612 = 12 year.
Worked example 4
Find the simple interest on 40 000 Frw at 9% per year for 8 months.
T = 812 = 23 year.
I = 40 000 × 9 × 23 ÷ 100. Step by step: 40 000 × 9 = 360 000, then × 2 ÷ 3 = 240 000, then ÷ 100 = 2 400 Frw.
Tip
Say it like a chant: "P times R times T, over one hundred!" And make sure T is in years before you start.
Answers
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Quick check
Ineza saves 40 000 Frw at 5% simple interest per year for 2 years. How much interest does she earn?
