Consumer mathematics applies maths to money — savings, loans, investments and interest.
1. Simple interest
Simple interest
$I = \frac{PRT}{100}$$P$ = principal, $R$ = rate (% per year), $T$ = time (years). The interest is the same each year.
2. Compound interest and financial management
With compound interest, interest is earned on the interest already added, so savings grow faster over time. Good financial management — budgeting income against expenses and saving regularly — is the practical goal of the chapter.
Worked example
Find the simple interest on $\text{RM}1000$ at $5\%$ per year for $2$ years.
$I = \dfrac{PRT}{100} = \dfrac{1000 \times 5 \times 2}{100} = 100$.
Exam tips
- Simple interest: $I = \dfrac{PRT}{100}$ — the same amount each year.
- Compound interest grows faster because you earn "interest on interest".
- A budget balances income against expenses so you can save.