Compound Interest Amount invested = £3000 Interest Rate = 4% Interest at end of Year 1= 4% of £3000 = 0.04 x £3000 = £120 Amount at end of Year 1= £3120 Interest at end of Year 2= 4% of £3120 = 0.04 x £3120 = £ Amount at end of Year 2= £ £ = £ and so on Step-by-step Method

Amount invested = £3000 Interest Rate = 4% Amount at end of Year 1= 104% of £3000 = 1.04 x £3000= £3120 and so on Using a multiplier Amount at end of Year 2 = 1.04 x £3120 = £ Try repeated calculations like this one on your calculator Compound Interest

Compound Interest – Repeated Calculations £3000 invested at 4% interest End of Year nAmount A(£) How much is in the account after 5 years?

Amount invested = £3000 Interest Rate = 4% Using indices Amount at end of Year n = 1.04 n x £3000 Amount at end of Year 2 Amount at end of Year 5 = x £3000 = x £3000 = £ = £ What are the advantages and disadvantages of each method? Compound Interest

Depreciation A new car costs £ Age of car (n years)Value (£) What will it be worth when it is 5 years old? What will the car be worth when it is 20 years old? Its value falls by 15% per year In this case the multiplier is0.85

Falling Sales Formula for annual sales n years from now A company’s sales of a product are falling by 6% per annum. Estimate the annual sales 6 years from now. They sold this year. = 0.94 n x Estimate of annual sales 6 years from now = x about Check this by repeated calculations. In this case the multiplier is 0.94

Combining % Changes Number after receiving 3% extra = 103% of 2000 = 1.03 x 2000 A shareholder owns 2000 shares. How many shares will she have after these transactions? She expects to get 3% more shares then plans to sell 25% of her shareholding. = 2060 Number after selling 25%= 75% of 2060 = 0.75 x 2060= 1545 What % is this of her original shareholding? = 77.25%  100 or 1.03 x 0.75 =

Combining other % Sale Price = 75% of normal price = 75% of 130% of cost price A shop marks up the goods it sells by 30% What is the overall % profit or loss on goods sold in the sale? In a sale it reduces its normal prices by 25% The shop makes a 2.5% loss on goods it sells in the sale = of cost price = 0.75 x 1.3 x cost price

Reversing % Changes x previous price = £66.42 Previous price The price of a train fare increased by 2.5% recently. How much did it cost before the rise in price? It now costs £66.42 Previous price= £64.80 = £66.42  1.025

Reversing % Changes x full price = £25.90 Full price After a 12.5% discount, the insurance costs £25.90 Full price = £29.60 = £25.90  What was the cost before the discount?