Contents of Simple Interest

Simple Interest

If someone were to receive 5% interest on a beginning value of $100, the first year they would get:

.05 × $100 - or - $5 in interest.
If they continued to receive 5% interest on the original $100 amount, over five years the growth in their investment would look like this:
Year 1: 5% of $100 = $5 + $100 = $105 Year 2: 5% of $100 = $5 + $105 = $110 Year 3: 5% of $100 = $5 + $110 = $115 Year 4: 5% of $100 = $5 + $115 = $120 Year 5: 5% of $100 = $5 + $120 = $125

Lecture Notes

Simple interest is, well, simple to calculate. Let's start with an example. If someone were to receive 5% interest on a beginning value of $100, the first year they would get .05 (which is 5%) times 100, or $5 in interest. If they continue to receive 5% on the original $100 amount over five years, their investment would be calculated as shown on the slide.