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in today's video we're going to look at
simple interest and see how we can
calculate it
to understand how it works let's imagine
that you had 200 pounds of savings
and that you lent it to somebody at a
simple interest rate of three percent a
year
what does that actually mean
well it means that at some point that
person will have to pay you back the
original hundred pounds they borrowed
plus an extra three percent for every
year that they're borrowing the money
so to find out how much they'd owe you
after just one year
would you need to find three percent of
200 pounds which would be the interest
and add that to the original 200 pounds
we've already covered how to find a
percentage of a number in another video
but the technique that we'll use here is
to take the percentage number so 3
divide it by 100 to turn it into a
decimal
so 0.03
and then multiply that by the number
that you want a percentage of
so because we want 3
of 200 pounds we do 0.03 times 200
which is 6 pounds
and now that we know that the interest
would be 6 pounds a year we just add
that to the original 200 pounds to find
out that the person would owe you 206
pounds
now of course they might not have
borrowed it for just one year they may
have borrowed it for a longer period
so let's now try and find out how much
the w if they kept it for two years
for this we could just take how much
they do after one year so the 206 pounds
and then add on another year's worth of
interest so add six pounds
which would bring the total debt to 212
pounds
this technique is pretty good if you
just have very low numbers so one year
two year three years and so on
but if they ask for a much longer period
like 10 years then we might need to use
a slightly different technique
for this we could still take the
original 200 pounds
but this time we need to add 10 times
the annual interest
because they're borrowing it for 10
years
so 200 pounds
plus 10 times 6 pounds because it's
going to be an extra 6 pounds of
interest each year
so that gives us 200 pounds plus 60
pounds
or 260 pounds in total
let's try another one and give the video
a pause if you want to give it a go
first
so in this question we're told that dora
invests 600 pounds for six years in a
bank account
and that the account pays simple
interest at a rate of 2.1 percent per
year
our job is to work out the total amount
of money that shall have at the end of
the six years
so for this one we need to take the 600
pounds original investment
because you'll get that back at the end
and add six years worth of annual
interest
and remember to look at the annual
interest we just convert the 2.1 percent
to a decimal by dividing it by 100 which
would be 0.021
and then multiply it by the original
amount of 600 pounds
so that would give us 12 pounds 60 of
interest each year
then if we substitute this into our
equation we get 600 pounds plus 6 times
12 pounds 60.
and so if we simplify that that gives us
600 pounds plus 75 pounds 60
and so a total of 675 pounds 60 pence
anyway that's everything for this video
so i hope that made sense
if you liked it then please do give us a
like and subscribe
and we'll see you again soon cheers
