Simple Interest

The video tutorial explains the concept of interest, focusing on simple interest. It describes how interest is charged or earned, and provides a detailed explanation of simple interest, including how to calculate it using a straightforward multiplication method. The video includes practical examples and exercises to reinforce learning. It concludes by mentioning that banks typically use compound interest, which will be covered in another video.

What is the primary reason a bank pays interest on savings?

• To encourage spending

• To reduce taxes

• To increase loan amounts

• As a thank you for saving with them

How is simple interest calculated?

• By adding the principal and interest rate

• By multiplying the principal, interest rate, and time period

• By dividing the interest rate by the time period

• By subtracting the interest from the principal

If you earn 4% interest on £2,000 for five years, how much simple interest will you have paid?

• £200

• £400

• £500

• £800

What happens if money is not left in a bank account for a full year?

• Interest rate increases

• Only a fraction of the interest is paid

• Full interest is paid

• No interest is earned

Why do banks prefer compound interest over simple interest?

• It is a traditional method

• It is more beneficial for the customer

• It results in higher returns for the bank

• It is easier to calculate