Simple and Compound Interest
Simple interest is earned on the original amount only, whereas compound interest is earned on the amount plus previously added interest.
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Simple interest is earned on the original amount only, whereas compound interest is earned on the amount plus previously added interest.
- Simple interest I equals PRT over 100
- Compound amount is P times (1 + r) to the power n
- Compounding grows faster over time
🧠 Quick quiz
Three questions. Score 2 or more to complete the topic.
What is Simple and Compound Interest?
Within Mathematics, which covers numbers, algebra, geometry, trigonometry and statistics from first principles to exam level, this topic explains Simple and Compound Interest. Maths builds step by step, so each topic here gives you a rule, a picture and a quick check you can use on homework and in exams.
Check that you can explain Simple and Compound Interest in your own words and give one example from everyday life. If you can do that, you have understood the core idea.
Understanding Simple and Compound Interest gives you a reliable method you will reuse in later maths units, in science lessons and in data work.
Simple and Compound Interest in detail
Interest is the extra money paid for borrowing or earned for saving. Simple interest is calculated only on the original amount: I = P × r × t, where P is the principal, r is the rate and t is the time. £500 at 4% for 3 years earns £60.
Compound interest is calculated on the original amount plus any interest already added, so the balance grows by a multiplier each period: A = P(1 + r)ⁿ. Over many years compound interest grows much faster than simple interest, which is why early saving matters and why debts can grow quickly if unpaid.
How the interactive helps you understand Simple and Compound Interest
Watch the growth curve in the interactive. Use any sliders or buttons it offers to change the values and see how the growth curve responds.
Before you change anything, predict the result. Then change one value at a time and check whether your prediction was right. This is a quick way to build a correct mental model of Simple and Compound Interest.
Real-life uses and examples
- Spot Simple and Compound Interest in exam questions, where it often sits inside a short word problem.
- Check a homework answer about Simple and Compound Interest by estimating first, then working it out step by step.
- Use Simple and Compound Interest when comparing prices, discounts or recipe quantities in everyday life.
Common mistakes to avoid
- Forgetting units, signs or brackets when you apply Simple and Compound Interest.
- Memorising the steps for Simple and Compound Interest without checking why they work.
- Learning the definition without testing it. Use the quiz and the interactive to check that you can apply the idea.
Frequently asked questions about Simple and Compound Interest
What is Simple and Compound Interest?
Simple interest is earned on the original amount only, whereas compound interest is earned on the amount plus previously added interest.
What are the most important points about Simple and Compound Interest?
The main points are: Simple interest I equals PRT over 100; Compound amount is P times (1 + r) to the power n; Compounding grows faster over time.
Why is Simple and Compound Interest useful?
Understanding Simple and Compound Interest gives you a reliable method you will reuse in later maths units, in science lessons and in data work.
How can I practise Simple and Compound Interest?
Open the interactive at the top of this page and change the controls one at a time. Predict the result before each change, then take the three-question quiz. A score of two or more marks the topic as complete on this device.
Which topics are related to Simple and Compound Interest?
Related topics in Mathematics include Rates and Speed, Negative and Fractional Indices, Surds.