Simple Interest
Interest earned on the principal only.
Key idea
Interest earned on the principal only.
In depth
Simple interest is earned only on the original principal: I = P r t. Money grows linearly because interest is not added to the base. Total amount = P + I.
Worked example
1,000 at 5% for 3 years: I = 1000 × 0.05 × 3 = 150. Total 1,150.
Formula
Real-world uses
- Calculating interest on a fixed deposit
- Estimating the cost of a short loan or a car finance agreement
Common mistake
Using months or days for t while the rate is yearly. Keep units consistent.
How to learn this
- Read the key idea and say it in your own words.
- Work through the worked example, then try a similar problem.
- Use the interactive lesson’s visual and mini-quiz to check the pattern.
Frequently asked questions
What is Simple Interest?
Interest earned on the principal only. It is a topic at the intermediate level in Arithmetic & Number Sense.
What is the formula for Simple Interest?
The key formula is I = P r t.
Where is Simple Interest used in real life?
Real-world examples: Calculating interest on a fixed deposit; Estimating the cost of a short loan or a car finance agreement.
What should I learn before Simple Interest?
Make sure you are comfortable with Discounts and Sales Tax, the previous topic in Arithmetic & Number Sense.
What is a common mistake with Simple Interest?
Using months or days for t while the rate is yearly. Keep units consistent.
How can I practise Simple Interest?
Open the interactive lesson, play with the visual, then answer the three-question mini-quiz. Getting two right marks the topic complete.
What comes after Simple Interest?
Move on to Compound Interest next.
Related intermediate topics in Arithmetic & Number Sense
- Long Multiplication – Multiply by each digit of the multiplier, shift by place value, then add partial products.
- Long Division – Divide, multiply, subtract and bring down repeatedly to get the quotient.
- Factors and Multiples – Factors divide a number exactly; multiples are its products with whole numbers.
- Divisibility Rules – Quick tests: by 2 last digit even, by 3 digit-sum divisible by 3, by 5 ends 0/5, by 9 digit-sum divisible by 9.
- Prime Numbers – A prime has exactly two positive divisors: 1 and itself.
- Composite Numbers – Numbers greater than 1 with more than two factors.