Exploring Simple Interest Concepts

The video tutorial explains the concept of interest, focusing on simple interest. It describes how interest is charged or paid by banks and provides a detailed explanation of simple interest, including how to calculate it using examples. The video also includes practice questions for viewers to test their understanding. Finally, it concludes with a brief mention of compound interest, which will be covered in another video.

What is interest in the context of banking?

• A penalty for late payments

• A reward for account referrals

• A charge for borrowing money

• A fee for account maintenance

What are the two main types of interest?

• Direct and indirect

• Fixed and variable

• Simple and compound

• Compound and complex

How is simple interest calculated annually?

• Based on market rates

• A fixed percentage of the borrowed amount

• A negotiated rate between the bank and customer

• A variable rate depending on the economy

If you borrow £2,000 at a 4% annual rate, how much interest do you pay each year?

• £100

• £200

• £80

• £120

What is the total simple interest paid over five years on a £2,000 loan at 4% per year?

• £200

• £400

• £300

• £500

How do you calculate simple interest for a partial year?

• Prorate based on the number of months

• Double the interest rate for partial years

• Use the same annual interest rate

• Ignore the partial year in calculations

What would be the interest for £2,800 at 4% for four years?

• £512

• £392

• £448

• £560

After adding simple interest for four years to the principal, what is the total amount in the account?

• £3,000

• £2,392

• £3,192

• £2,800

Why do banks prefer compound interest over simple interest?

• Customers prefer it

• It is mandated by law

• It yields a higher return over time

• It is easier to calculate

What should you do if you want to learn more about compound interest?

• Subscribe to the video channel

• Check out the Fusco app

• Ignore simple interest

• Only focus on simple interest