1. Compound Interest

2. Which amount would you rather have in 10 year’s time? Option A- Put £1000 in a box under the bed, and at the end of each year put £100 in. Option B- £1000 in a bank account, earning 8% interest each year. Option C- £1000 in a jar, add £1 after the first year, £2 after the second year, £4 after three years, doubling the amount added each time.

3. Bank Accounts Savings accounts pay interest each year, at a given percentage rate, usually expressed for example as 5% per annum (p.a.)

4. Example Mr Kay invests £2000 in the Mathematician’s Building Society at an interest rate of 6% p.a. How much is the money worth after 3 years? Hint- What is the multiplier to increase by 6%? 1.06 1.06

5. Method…. 0 years £2000 1 year £2000 x 1.06 = £2120 2 years £2120 x 1.06 = £2247.20 3 years £2247.20 x 1.06 = £2382.032 So at the end of 3 years the money is worth £2382.03, rounded to the nearest penny