MEP Pupil Text 11
Note that the amount of interest added increases each year.
The final value could have been found in one calculation:
×
=
3
£
200
1 04
.
£
224 97
.
.
Worked Example 2
When Gemma was born, her grandmother invested £200 in a building society for her.
Find the value of this investment after 18 years if the interest rate is 6% per year.
Solution
=
×
18
Final value
£
200
1 06
.
= £
570 87
.
.
Problems with depreciation can be tackled in a similar way.
Worked Example 3
A car was bought for £14 000. Its value decreases by 8% each year. Find the value of the
car after:
(a)
1 year
(b)
5 years
(c)
10 years.
Solution
Decreasing the value by 8% leaves 92% of the original value.
=
×
(a)
Value after one year
£
14 000
0 92
.
= £12 880
=
×
5
(b)
Value after 5 years
£
14 000
0 92
.
= £
9227 14
.
=
×
10
(c)
Value after 10 years
£
14 000
0 92
.
= £
6081 44
.
Note
You can see from these worked examples that the total amount in an account after n years,
A
, with interest of r % is given by
n
n
r
=
+
A
1
A
n
0
100
where
A
is the initial sum invested.
0
257