Understanding Principal and Interest: The principal is the initial amount of money invested, while interest is the extra amount earned based on a set interest rate, typically yearly.
Calculating Simple Interest: Interest is calculated by multiplying the principal by the interest rate. For example, £100 at 5% interest results in £5 interest after 1 year.
Determining Principal from Interest Earned: To find the initial investment when interest and rate are known, divide the interest by the rate (e.g., £30 at 5% interest implies an initial principal of £600).
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