To calculate the amount of simple interest over 5 years you simply multiply the interest earnt in year one by five - 125 5 625. The difference between the two is that simple interest is a fixed amount of interest. Youre asked to calculate the amount after 3 years with 4500 and a 4 compound interest rate.
If you deposit 1000 in a bank account which is paying 3 compound interest per year.
What is Compound Interest. This video explains how to answer compound interest questions. To understand the compound interest we need to do its Mathematical calculation. The main issue is to change the 104 to 104 and then you can plug the numbers directly into your calculator these type of GCSE questions are generally on the calculator paper.