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Theo invests £500 at a rate of 6% per year simple interest - OCR - GCSE Maths - Question 11 - 2020 - Paper 1

Question 11

Theo invests £500 at a rate of 6% per year simple interest. (a) Work out the interest he receives in one year. (b) Work out the value of his investment after 5 yea... show full transcript

Worked Solution & Example Answer:Theo invests £500 at a rate of 6% per year simple interest - OCR - GCSE Maths - Question 11 - 2020 - Paper 1

Step 1

(a) Work out the interest he receives in one year.

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Answer

To calculate the simple interest for one year, we use the formula:

$I = P imes r imes t$

where:

$I$ = interest
$P$ = principal amount (£500)
$r$ = rate of interest (6% or 0.06)
$t$ = time in years (1 year)

Substituting the values in:

$I = 500 imes 0.06 imes 1 = 30$

Therefore, the interest he receives in one year is £30.

Step 2

(b) Work out the value of his investment after 5 years.

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Answer

To find the total value of the investment after 5 years, we first calculate the total interest and then add it to the principal amount.

Using the same formula for simple interest:

$I = P imes r imes t$

For 5 years, we have:

$I = 500 imes 0.06 imes 5 = 150$

Now, adding the interest to the principal:

Total Value = Principal + Interest

Total Value = £500 + £150 = £650

Thus, the value of his investment after 5 years is £650.

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