What is Interest? Discuss with a partner for 2 minutes!
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What is Interest?
Discuss with a partner for 2 minutes!
![Page 2: What is Interest? Discuss with a partner for 2 minutes!](https://reader036.fdocuments.in/reader036/viewer/2022082510/5a4d1b787f8b9ab0599b7fd6/html5/thumbnails/2.jpg)
What is Interest?It pays to save money (investments)The bank uses your money and pays you for that use – the bank pays you interest
It costs to borrow money (loans)You pay for the use of borrowed money – you pay interest
The interest is usually a percentage of the sum invested or borrowed called the interest rate (ex. 5% per annum or p.a.)
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Simple Interest
Interest calculated on principal amount ONLY – remains the same every year:
There are 2 ways to calculate Simple Interest..
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Simple InterestSally deposits €600 into an account with a rate of 5% per annum simple interest. Calculate the interest Sally receives in 5 years.
Method 1 Method 25% of €600 for 5 years
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Simple Interest Worksheet