Repeated Proportional Change

OCR Module 8

Reminder

• How to calculate a PERCENTAGE change

• Decrease £17.60 by 15%

85% of 17.60

= £14.96

Left with 85% of 17.60

= 17.60 x 0.85

MULTIPLIER of 0.85

So….

• We can use this procedure for repeated changes like

• Interest of money in bank account

• Depreciation of a motor car

e.g. Interest on Bank Account

£4 000 earns 5% interest each year. How much is it worth after 3 years?

End of Year 1

End of Year 2

End of Year 3

4 000 x 1.05 = 4 200

4 200 x 1.05 = 4 410

4 410 x 1.05 = 4 630.50

4 000 x 1.05

4 000 x 1.05 x 1.05

4 000 x 1.05 x 1.05 x 1.05

4 000 x 1.052

4 000 x 1.053

4 000 x 1.051

COMPOUND INTEREST

Simple Interest?

• If an account only receives SIMPLE INTEREST, the £200 earned in the first year would be the same for every year

• In our example, that means

4 000 + 3 x 200 = £4 600