Simple interest

Definition

Simple interest is earned or charged only on the original amount (the principal), so it grows by the same amount every year. In Grade 9 it is calculated as SI = P × i × n; in Grade 10 the formula becomes A = P(1 + in).

Worked example

R2 000 at 6% p.a. simple interest for 3 years earns 2 000 × 0.06 × 3 = R360.

With compound interest the same investment would earn R382.03, because interest is also earned on earlier interest.

Where it appears in the exam

Simple interest is part of the financial maths section of CAPS Grade 9 Mathematics and appears in school tests and the end-of-year exam.

Step-by-step method

1. Write the rate as a decimal: 6% = 0.06.
2. Identify P (the principal) and n (the number of years).
3. Multiply P × i × n to get the interest.
4. Add the interest to P if the question asks for the final amount.

Common mistake

Using 6 instead of 0.06 for the interest rate.

Related financial maths terms

• Compound interest
• Effective interest rate
• Annuity
• Depreciation
• Hire purchase
• Nominal interest rate

Frequently asked questions

What does simple interest mean in Grade 9 Maths?

Simple interest is earned or charged only on the original amount (the principal), so it grows by the same amount every year. In Grade 9 it is calculated as SI = P × i × n; in Grade 10 the formula becomes A = P(1 + in).

When do you learn about simple interest?

Simple interest is taught in the financial maths section of CAPS Grade 9 Mathematics and is used again in Grades 10 to 12.

How do I practise questions involving simple interest?

Snap a question that uses simple interest into Snap&Learn with your grade set to Grade 9, or work through the Grade 9 topic guide and practice papers.