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Compound Interest and Depreciation

Compound Interest and Depreciation

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Lesson

Recap your knowledge with an interactive lesson

8 minute activity

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Side-by-side timeline showing £1000 growing by 5% each year with multiplier 1.05 and £1000 depreciating by 10% each year with multiplier 0.90 over 3 years

The starting amount is 100% of itself, so an increase uses a multiplier bigger than 1 and a decrease uses a multiplier smaller than 1. For example, a 6% increase uses 1.061.061.06, while a 6% decrease uses 0.940.940.94.

To build a multiplier, rewrite the new percentage as a decimal. So 8% increase means 108%=1.08108\% = 1.08108%=1.08, and 25% decrease means 75%=0.7575\% = 0.7575%=0.75. Compound interest and depreciation both use these multipliers again and again over time.

Questions

Put it into practice with exam-style questions

43 exam-style questions

Practice questions

Question 1

4 marks

Sarah wants to invest £5000 for three years. She can choose between Bank P and Bank Q.

Bank P

2.5% compound interest per annum

Bank Q

3% compound interest in the first year 2.2% compound interest for each extra year

Which bank will give Sarah the most interest after three years? You must show your working.

Compound Interest and Depreciation Revision Guide

  1. GCSE
  2. /Maths
  3. /Compound Interest and Depreciation

Revision notes for Edexcel GCSE Maths Compound Interest and Depreciation: explanations and worked examples.

Revision guides

Practise questions

1 of 5

A laptop loses 7%7\%7% of its value each year. Which multiplier is used to calculate its value after each year?