### PRESENTATION OUTLINE

### A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate by the principal by the number of periods.

### Simple interest is called simple because it ignores the effects of compounding. The interest charge is always based on the original principal, so interest on interest is not included.

### STEP1:

Obtain the information required to calculate the total amount of interest to be paid.

### STEP 2:

Use the amount of money you wish to borrow as the principal.

### STEP 3:

Express the interest rate as a fraction over a hundred multiplied by the amount over one.

### STEP 4:

Take the total and multiply it by the term and don't forget to add initial amount.

### EXAMPLE:

- Initial amount: R5000
- Interest: 12%
- Term: 4 years

### Year 1: 5000 x 12/100 =600

Year 2:5000 x 12/100 =600

Year 3:5000 x 12/100 =600

Year 4:5000 x 12/100 =600