Last reviewed: 7 November 2026
Updated November 2026. These Grade 8 simple and compound interest notes also cover appreciation, depreciation and hire purchase. Simple interest = (P × R × T) ÷ 100, where P is the principal, R the rate per cent per year and T the time in years. Compound interest is worked out step by step: each year’s interest is added to the principal before the next year’s interest is calculated. KSh 10,000 at 10% compound interest grows to KSh 11,000, then 12,100, then 13,310 over three years.
The examples use made-up figures and are original practice for Kenyan junior school learners, not an official paper or financial advice. For the other Grade 8 maths topics, see our Grade 8 mathematics revision guide and the Grade 8 notes hub.
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What the Grade 8 Curriculum Covers
Money is a sub-strand under Measurements in the Kenya Institute of Curriculum Development’s Grade 8 Mathematics design. Learners identify interest and principal, calculate simple interest, calculate compound interest per annum step by step up to three years, work out appreciation and depreciation up to three years, and work out hire purchase. The design is listed on the KICD Grade Eight curriculum designs page.
Interest and Principal
The principal is the amount borrowed or saved. Interest is the extra money paid by a borrower, or earned by a saver, for using money over time. The amount is principal + interest.
Simple Interest
Simple interest is charged only on the original principal, as defined in OpenStax Contemporary Mathematics’ section on simple interest.
Worked example
Wanjiru borrows KSh 20,000 at 8% simple interest per year for 3 years. Interest = 20,000 × 8 × 3 ÷ 100 = KSh 4,800. Amount repaid = 20,000 + 4,800 = KSh 24,800.
Worked example: finding the rate
KSh 15,000 earns KSh 2,700 simple interest in 2 years. R = (100 × 2,700) ÷ (15,000 × 2) = 9% per year.
Compound Interest, Step by Step
With compound interest, interest is earned on the interest already added, as explained in OpenStax Contemporary Mathematics’ section on compound interest. Grade 8 uses the year-by-year method.
| Year | Principal at start | Interest at 10% | Amount at end |
|---|---|---|---|
| 1 | 10,000 | 1,000 | 11,000 |
| 2 | 11,000 | 1,100 | 12,100 |
| 3 | 12,100 | 1,210 | 13,310 |
Compound interest over 3 years = 13,310 − 10,000 = KSh 3,310. Simple interest at the same rate would be only KSh 3,000.
Appreciation and Depreciation
Appreciation is an increase in value over time (land in a growing town is a common example). Depreciation is a loss in value (vehicles, phones and machines usually depreciate). Both are worked out step by step like compound interest.
Worked example: depreciation
A motorcycle bought for KSh 120,000 depreciates at 20% per year.
- After year 1: 120,000 − 24,000 = 96,000.
- After year 2: 96,000 − 19,200 = 76,800.
- After year 3: 76,800 − 15,360 = KSh 61,440.
Worked example: appreciation
A plot worth KSh 500,000 appreciates at 10% per year. After 1 year: 550,000. After 2 years: 550,000 + 55,000 = KSh 605,000.
Hire Purchase
Hire purchase lets you take goods home after paying a deposit, then pay the rest in instalments. The total hire purchase price is usually higher than the cash price.
Worked example
A fridge has a cash price of KSh 30,000. On hire purchase you pay a deposit of KSh 6,000 and 12 monthly instalments of KSh 2,400.
- Instalments: 12 × 2,400 = 28,800.
- Hire purchase price: 6,000 + 28,800 = KSh 34,800.
- Extra cost: 34,800 − 30,000 = KSh 4,800.
Comparing these totals is part of spending money responsibly, which the curriculum lists as an outcome.
Original Practice Questions With Worked Answers
- Find the simple interest on KSh 8,000 at 5% for 4 years. 8,000 × 5 × 4 ÷ 100 = KSh 1,600.
- Find the amount after 2 years if KSh 5,000 earns 6% compound interest. 5,300 then 5,618. Amount KSh 5,618.
- A laptop worth KSh 60,000 depreciates by 15% a year. Find its value after 2 years. 51,000 then 43,350. KSh 43,350.
- A TV costs KSh 25,000 cash, or KSh 5,000 deposit plus 10 instalments of KSh 2,300. How much more is hire purchase? 5,000 + 23,000 = 28,000; KSh 3,000 more.
- Which earns more over 3 years at the same rate: simple or compound interest? Compound interest, because interest is also earned on earlier interest.
Cover the answers and attempt each question first. For timed practice, use the Grade 8 revision papers or the Grade 8 CBC Challenge. These notes are free; full revision access is available with the KSh 20 Day Pass or the KSh 500 Monthly Pass.
Frequently Asked Questions
What is the formula for simple interest?
Simple interest = (P × R × T) ÷ 100, with P the principal, R the yearly rate per cent and T the time in years.
How is compound interest calculated in Grade 8?
Year by year: find the interest for the year, add it to the principal, and use the new total for the next year, up to three years.
What is the difference between appreciation and depreciation?
Appreciation is an increase in value over time; depreciation is a decrease.
What is hire purchase?
A way to buy goods by paying a deposit and then instalments. The total paid is usually more than the cash price.