Lesson video

Hi everyone, I'm Mr. Lund and in this lesson, we're going to calculate simple interest.

Hi everyone.

I'm going to show you how to calculate simple interest.

Interest is paid out at the end of each year in this example.

Mindy invests 2000 pounds at 3% simple interest.

She does this for four years.

How much interest does she receive altogether? At the end of the first year, she makes 3% on her original investment.

3%, 2000 pounds is 60 pounds.

The end of the second year, she makes 3% on her original investment again, that's 60 pounds.

That occurs for the third and the fourth years.

So we can say that the total interest is four times by 60 pounds, which finds me a total of 240 pounds.

Mindy has made 240 pounds interest on an original investment of 2000 pounds at 3% simple interest over four years.

Let's look at that question again visually using a bar model.

Here's Mindy's original investment of 2000 pounds.

Think of that as a hundred percent.

Each year, she's earning 3% interest on the original amount.

We calculated that to be 60 pounds each year.

That means she's made 12% increase on her original investment.

Altogether, now Mindy has 2,240 pounds in her account.

Jaydon invests 6,000 pounds at 4% simple interest for six years.

How much interest does he receive altogether? To calculate simple interest, first of all, in this question we need to calculate 4% of 6,000 pounds.

I've used a multiplier method to work out that 4% of 6,000 is 240 pounds.

That means he earns 240 pounds interest at the end of each year.

The total interest, because he's had 6,000 pounds invested for six years, is six times by 240.

That gives me the total of 1,440 pounds interest over six years.

Also same, almost different with this question, Jaydon invests 6,000 pounds at 4% simple interest for six years.

How much is his investment worth after six years? In the last question I asked you how much interest he earned and that is the main difference.

So 6,000 pounds initial investment is added to the interest earned.

Well, we calculated that previously.

So 6,000 pounds plus the interest he's earned means that in his bank account now he has 7,440 pounds.

Here's some questions for you to try.

Just be careful to check whether you're working out interest or the total investments, okay? I'll speak out.

Pause the video, return to check your answers.

Here's the solutions to question number one.

How did you calculate the 5% of 3000? Here's one method I could use.

I've divided 3000 by 10 to give me 300.

That finds me 10%, which is 300.

And then I'm dividing both sides by two to find 5% equaling 150.

Let's try on question two now, pause the video and return to check your answers.

Here's the solutions to question two B.

Now, in two B, real large question, if you double your original investment, do you double the amount of interest you get? Yes.

With simple interest, that is the case.

in this far pause the video and return to check your answers.

Here's the solutions to question three A and B.

It becomes important to you as an adult about where you place your money and which investments will be best for you and your money to grow.

That is something that hopefully in your lifetime, you will start to practise right now just before you take your GCSEs.