numbers compound interest compound interest includes the new percentage each time the increase is...
TRANSCRIPT
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