Simple Interest

Question

 A building society offers a rate of 11% per annum simple interest. Beth- Ann deposited $24,000 in the society for 15 months.

(i) Calculate the amount of money due to her at the end of this period.

 

The building society charged her a processing fee of $1,500

(ii) Calculate this fee as a percentage of the money originally deposited.

Answer 1

The formula for simple interest is  I = P*R*T  where  

 

I = Interest  

P = Principal ($24000)  

R = Rate as a decimal (0.11)  

T = Time in years (15 months = 1.25 years)  

 

So I = 24000*0.11*1.25 = $3300  

At the end she is due her principal plus interest = 24000 + 3300 = $27300  

 

To calculate the processing fee as a percentage of the deposit, divide the fee by the deposit and then multiply by 100 to convert to a percentage  

 

($1500/$24000)*100 = (0.0625)*100 = 6.25%