How do you calculate the interest rate?

To calculate the interest rate, divide the interest earned by the principal and multiply by 100.

Interest rate calculation is a fundamental concept in finance and mathematics. To find the interest rate, you need to know three key pieces of information: the principal amount (the initial sum of money), the interest earned, and the time period over which the interest was earned. The formula to calculate the interest rate is:

\[ \text{Interest Rate} = \left( \frac{\text{Interest Earned}}{\text{Principal}} \right) \times 100 \]

Let's break this down with an example. Suppose you have £200 in a savings account, and after one year, you have earned £10 in interest. To find the interest rate, you would use the formula as follows:

1. Identify the principal (P): £200
2. Identify the interest earned (I): £10
3. Plug these values into the formula:

\[ \text{Interest Rate} = \left( \frac{10}{200} \right) \times 100 \]

4. Calculate the fraction:

\[ \frac{10}{200} = 0.05 \]

5. Multiply by 100 to convert to a percentage:

\[ 0.05 \times 100 = 5\% \]

So, the interest rate is 5%.

This method works for simple interest, where the interest is calculated only on the principal amount. For compound interest, where interest is calculated on both the initial principal and the accumulated interest, the calculation is more complex and involves different formulas. However, understanding the basic method of calculating simple interest rates is a great starting point for GCSE Maths students.