Numbers Compound Interest Compound interest includes the new percentage each time the increase is...
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Transcript of Numbers Compound Interest Compound interest includes the new percentage each time the increase is...
NumbersCompound InterestCompound interest
includes the new percentage each time the
increase is worked out.
NumbersIf I have £3,000 in a bank account and I receive 4% interest each year, how much does this increase
after 1 year, 2 years and 3 years?
NumbersYear 1
4% = 0.04£3,000 x 0.04 = £120
After 1 year I now have £3,120 in my account.
NumbersYear 2
4% = 0.04£3,120 x 0.04 = £124.80After 2 years I now have £3,244.80 in my account.
NumbersYear 3
4% = 0.04£3,244.80 x 0.04 = £129.79
After 3 years I now have £3,374.59 in my account.
Numbers£3,000 initial deposit + 4% (£120) each yearYear 1 - £3,120Year 2 - £3,240Year 3 - £3,360
Numbers£3,000 initial deposit + 4% compound interestYear 1 - £3,120Year 2 - £3,244.80Year 3 - £3,374.59
£3,120£3,240£3,360
NumbersA Bank offers interest of
2.75% each month.With £1,500 deposited,
how much will there be in the account after 1 year?
NumbersWe would need to have to work out the new amount
each month, this would take a very long time.
There is a quicker way…
NumbersThe formula below lets us
work this out in one complete calculation:
A = P(1+r)n
NumbersA = P(1+r)n
A = total amountP = initial amount
r = multipliern = number of months
NumbersA = P(1+r)n
A= £1,500 (1 + 0.0275)12
A= £1,500 (1.0275) 12
A = £1,500 x 1.38A = £2077.17