Data and Statistics

Question 1

How do we calculate simple interest?

Answer 1

Add the interest rate to the original amount each year.

Amount = Original amount x (1 + Interest rate x Number of years)

Question 2

How do we calculate compound interest?

Answer 2

Amount = Original amount x (1 + Interest rate) ^ (Number of years)

Question 3

Simple interest=5%
We start with £150,
What do we have after 2 years?

Answer 3

Original amount= £150
Interest rate= 1+0.05
Number of years= 2

150x1.05x2= £165

Question 4

Compound interest of 5% for 2 years on £150

Answer 4

£150 x (1.05)^2 = £165.38