InterestPractise calculating simple interest and compound interest on investments and loans. 
This is level 2; Investments earning compound interest. Give your first nine answers to two decimal places. You can earn a trophy if you get at least 9 correct and you do this activity online.
InstructionsTry your best to answer the questions above. Type your answers into the boxes provided leaving no spaces. As you work through the exercise regularly click the "check" button. If you have any wrong answers, do your best to do corrections but if there is anything you don't understand, please ask your teacher for help. When you have got all of the questions correct you may want to print out this page and paste it into your exercise book. If you keep your work in an ePortfolio you could take a screen shot of your answers and paste that into your Maths file. 




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Percentages  Before starting the Interest exercise make sure you are confident finding percentages of quantities.
Compare:  A table to be filled in Comparing the results of investing with simple interest against the results of investing with compound interest.
Level 1  Investments earning simple interest
Level 2  Investments earning compound interest
Level 3  Loans accruing compound interest
Level 4  Appreciation and depreciation
Level 5  Interest calculated halfyearly, quarterly or monthly
Level 6  Additional payments made during the investment period
Level 7  Artificial intelligence generated questions
Overdraft Charges  Do you understand how your bank charges you for taking out an overdraft?
Amortisation and Annuities  An exercises containing problems about gradually paying off loans and calculating pension plans.
Exam Style Questions  A collection of problems in the style of GCSE or IB/Alevel exam paper questions (worked solutions are available for Transum subscribers).
More on this topic including lesson Starters, visual aids, investigations and selfmarking exercises.
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See the National Curriculum page for links to related online activities and resources.
\(P\) is the principal, the amount originally invested.
\(r\) is the rate of interest expressed as a percentage.
\(n\) is the number of years the amount was invested for.
Don't wait until you have finished the exercise before you click on the 'Check' button. Click it often as you work through the questions to see if you are answering them correctly. You can doubleclick the 'Check' button to make it float at the bottom of your screen.
Answers to this exercise are available lower down this page when you are logged in to your Transum account. If you don’t yet have a Transum subscription one can be very quickly set up if you are a teacher, tutor or parent.
Transum subscriber Ann never fails to come up with some really interesting observations. Recently she has been time travelling:
“When I first used the compound interest formula it was introduced as the ‘future value’ formula.
Have you ever travelled back in time and used a negative value for n in the formula?
Surprisingly there’s no mention of using the formula when n is negative. Why do you think that is?
I think it’s a wonderful thing to notice that the compound interest formula can be used without any rearranging to find future values or past values. I’d be interested to get your opinion.
Maybe it’s just easier for students to think of multiplying by (1+r)^{n} to find the future value and to divide by (1+r)^{n} when finding the past value?”
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Transum,
Tuesday, September 10, 2024
"As a rough, 'rule of thumb' for compound interest, divide 72 by the percentage interest rate and you’ll have a great estimate for the number of years required for your investment to double in value."