1. ©G Dear2008 – Not to be sold/Free to use
General Mathematic
(HSC)
Annuities and
Loan Repayments
Compound Interest 1
Stage 6 - Year 12
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©G Dear2008 – Not to be sold/Free to use

2. A = P (1 + r)n 8.1 Compound Interest (1/3)
An Investment with a single initial contribution.
Interest compounds at the end of each period.
A = P (1 + r)n
A is the future value of the investment.
P is the Principal or Money Invested.
r is the rate of interest per period as a decimal.
n is the number of periods. 2

3. A = P (1 + r)n 8.1 Compound Interest (2/3)
Futurama Episode – Compound Interest
Calculate the value of a 93¢ investment at 2¼%
for 1000 years, compounding annually.
A = P (1 + r)n
A = 0.93 ( )1000
= 0.93 x
≈ $ 3

4. What is the future value of $10 000 at 10% p.a. for 3 years?
8.1 Compound Interest (3/3)
What is the future value of $ at 10% p.a. for 3 years?
Principal Year 1 = $10 000
Initial
Interest Year 1 = 0.10 x $10 000
= $1 000
Principal Year 2 = $10 000
+ $1 000
= $11 000
Interest Year 2 = 0.10 x $11 000
= $1 100
Principal Year 3 = $11 000
+ $1 100
= $12 100
Interest Year 3 = 0.10 x $12 100
= $1 210
Future Value = $12 100
+ $1 210
= $13 310 4