Simple Interest and Problems Involving Saving
Primary 6 · Mathematics
Simple Interest and Problems Involving Saving
Lesson 2 of 5
15 min
Let's begin
Mugisha's family borrows 50 000 Frw from their SACCO to buy a goat. The interest rate is 12% per year and they will repay after 1 year. How much money must they take back to the SACCO altogether? Not just the interest, but everything.
The amount (A) is the principal and the interest together:
A = P + I
Worked example 1
The goat loan.
I = 50 000 × 12 × 1 ÷ 100 = 6 000 Frw.
A = 50 000 + 6 000 = 56 000 Frw. The family must repay 56 000 Frw.
Worked example 2
Uwase saves 80 000 Frw in a SACCO at 5% simple interest per year and leaves it for 4 years.
Interest each year = 80 000 × 5 × 1 ÷ 100 = 4 000 Frw.
| End of year | 0 | 1 | 2 | 3 | 4 |
|---|---|---|---|---|---|
| Balance (Frw) | 80 000 | 84 000 | 88 000 | 92 000 | 96 000 |
The balance grows by the same 4 000 Frw every year. That steady growth is what makes it simple interest. Using the formula: I = 80 000 × 5 × 4 ÷ 100 = 16 000 Frw, and A = 80 000 + 16 000 = 96 000 Frw.
Worked example 3
A loan of 60 000 Frw at 10% per year for 1 year is repaid in 12 equal monthly payments. How much is each payment?
I = 60 000 × 10 × 1 ÷ 100 = 6 000 Frw.
A = 60 000 + 6 000 = 66 000 Frw.
Each payment = 66 000 ÷ 12 = 5 500 Frw.
Some lenders give a rate per month. Then the time must be in months too.
Worked example 4
100 000 Frw is borrowed at 2% per month for 6 months.
I = 100 000 × 2 × 6 ÷ 100 = 12 000 Frw. A = 112 000 Frw.
A rate of 2% per month is as much as 24% per year, so it is an expensive loan.
Tip
Interest is the EXTRA. Amount is EVERYTHING. If a question asks "how much altogether" or "how much will be in the account", add the interest to the principal.
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Quick check
A family borrows 40 000 Frw at 15% per year for 1 year. How much must they repay altogether?
