EXSAMPL:
Suppose £2000 is invested at 10% per annum (year) compound interests. How much money will
there be after 2
years?
‘compound’
interest here means that the interest must be worked out separately for each
year.
After 1 year:
After 2 year:
A car is bought for £12000. Each year, its value depreciates (goes down) by 5% of its value at the start of the year. How much is
the car worth after 2
year?
After 1 year:
loss
= 5% of 12000 = 600
value of car = 12000
– 600
= 11400
After 2 year:
loss
= 5% of 11400 = 570
value of car = 11400
– 570
= £10830
Simple interest.
This means work
out the interest for one year then multiply by the number of year.
EXSAMPL:
£2000
is invested at 10%
per annum (year)
simple interests. How much money will there be after 2 years?
EXSAMPL:
£500
is invested in a bank at 14%
per annum compound interest. How much money is in the bank after 5 years?
Use a percentage multiplier
1.14(100% + 14%
= 114%)
Now multiply by 1.14
every year to get the new amount.
Start with £500:
after 1 year:
500 × 1.14 = 570
after 2 year:
570 × 1.14 = 649.80
and soon
after 5 year:
total money =
= 962.71 (to the nearest
penny)
Tasks to the lesson 10
Other lessons:
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