Compound Interest
Example:
A man invests £2000 in a bank for 6 years earning 7% interest per annum. How much does he have at the end of the 6 years?
How do you calculate the question? You will do as follows.
6 x 7% is 42%.
42% of £2000 is £840.
£2000 + £840 is £2840.
He has £2840.
That is wrong. The last method used is to solve problems with simple interest.
If the question changes to:
A man invests £2000 in a bank for 6 years earning 7% interest of his original investment per year. How much does he have at the end of the 6 years?
This is the problem we would be solving with the last method.
So, how do you calculate compound interest in I/GCSE Mathematics?
A man invests £2000 in a bank for 6 years earning 7% interest per year. How much does he have at the end of the 6 years?
Which is the same as..
2000 x 1.07 x 1.07 x 1.07 x 1.07 x 1.07 x 1.07
or more simply,
2000 x 1.076
Reverse Percentage
Example 1:
A woman buys a painting from a car boot sale. She sells it for £129.75- 73% more than she bought it for. How much did she buy it for?
Buying price is 100% of original x
Current price is 173% of original (+73%) £129.75
1% of original is £129.75 ÷ 173 £0.75
New price is 100% è £0.75 x 100
The price she paid was £75.
Example 2:
A man buys a car that decreases in value by 18%. After one year, the car is worth £8,200. How much was it worth new?
New price is 100% of original x
Current price is 82% of original (-18%) £8,200
1% of original is £8,200 ÷ 82 £1,000
New price is 100% è £1,000 x 100
The new price of the car was £10,000
That's all
