Printable · GCSE Higher · ages 14-16
Growth and decay, compound interest worksheet — GCSE Higher
Fifteen questions on "growth and decay, compound interest" — DfE statement R16. Print it, or print three versions so neighbours cannot copy by letter; the key gives the letter for each version.
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Growth and decay, compound interest worksheet — GCSE Higher
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- 1.A car is bought for £9000. Its value decreases by 8% each year. Work out its value after 2 years.
- 2.A company had 8000 employees. The number of employees decreased by 5% in the first year, and then increased by 5% in the second year. Work out the number of employees at the end of the second year, to the nearest whole number.
- 3.Aisha invests £3200 in Account A, which pays 5% compound interest each year. She also invests £3200 in Account B, which pays 3% simple interest each year. Work out how much more Account A is worth than Account B after 2 years.
- 4.A sequence is defined by the iterative rule x_{n+1} = 0.5x_n + 20, with x_0 = 0. By working out x_1, x_2 and x_3, find the value that the sequence is approaching.
- 5.A patient is given a dose of 200 mg of a drug. Each hour, 30% of the drug remaining in the bloodstream is eliminated, and then a further dose of 50 mg is given. Using the recurrence D_{n+1} = 0.7D_n + 50, with D_0 = 200, work out the amount of drug in the bloodstream after 2 hours.
- 6.A vehicle is worth £18000. Its value decreases by 15% each year. Using the recurrence V_{n+1} = 0.85V_n, with V_0 = 18000, find the first whole number of years after which the vehicle's value drops below £10000.
- 7.A laptop costs £800 when new. Its value decreases by 25% of its value at the start of each year. Work out how much value the laptop loses in the second year.
- 8.Before a charity campaign, donations were £6400 per month. Donations grew by 8% in the first year after the campaign, and then fell by 3% in the second year as interest faded. Work out the amount donated per month at the end of the second year, to the nearest pound.
- 9.A process is modelled by the recurrence P_{n+1} = 0.6P_n + 40. As n increases, P_n approaches a long-run value L, which satisfies L = 0.6L + 40. Solve this equation to find L.
- 10.Maya buys a vintage car for £15000. Its value is expected to increase by 4% each year for 2 years. She then plans to sell the car and use £2000 of the money from the sale to buy a trailer. Work out how much money she will have left after selling the car and buying the trailer.
- 11.A loan of £3000 has interest added at 2% each month, and then a fixed repayment of £200 is made. This is modelled by the recurrence B_{n+1} = 1.02B_n − 200, where B_n is the balance after n months and B_0 = 3000. Work out the balance after 2 months.
- 12.Leah puts £4000 into a savings account paying 3% compound interest each year. At the end of 2 years she takes out all of the money and spends £1500 of it on a laptop. Work out how much of the money she has left.
- 13.A machine is bought for £8500. Its value depreciates by 6% each year. Work out the value of the machine after 3 years, to the nearest pound.
- 14.A sequence is defined by the iterative rule x_{n+1} = 0.8x_n + 50, with x_0 = 200. Work out x_2, the value of the sequence after two iterations.
- 15.A car is bought for £12000. Its value falls by 15% in the first year and by 10% in each year after that. Work out the value of the car 3 years after it was bought.
Answer key
- (c) £7617.60 — To decrease by 8% each year, multiply by 0.92 (100% − 8%) twice. £9000 × 0.92 × 0.92 = £7617.60. £7560.00 comes from treating the two 8% decreases as a single flat 16% decrease applied once instead of compounding: £9000 × 0.84 = £7560.00. £8280.00 comes from applying the 8% decrease only once, for 1 year instead of 2: £9000 × 0.92 = £8280.00. £10497.60 comes from multiplying by 1.08 twice, increasing the value instead of decreasing it: £9000 × 1.08 × 1.08 = £10497.60.
- (b) 7980 — After the first year: 8000 × 0.95 = 7600. After the second year: 7600 × 1.05 = 7980. 8000 comes from assuming a 5% decrease followed by a 5% increase returns exactly to the starting number — it does not, because the increase acts on the smaller, already-reduced number. 8400 comes from applying only the second year's 5% increase to the original number: 8000 × 1.05 = 8400. 7600 comes from applying only the first year's 5% decrease and stopping there, without applying the second year's increase.
- (c) £136 — 5% interest each year means the value becomes 100% + 5% = 105% of the previous year's value, and 105% = 1.05, so the multiplier is 1.05. Account A: £3200 × 1.05 × 1.05 = £3528. Account B (simple interest): £3200 + 2 × (£3200 × 0.03) = £3392. The difference is £3528 − £3392 = £136. (£128 comes from working out Account A with simple interest too, instead of compound: £3200 + 2 × (£3200 × 0.05) = £3520, then £3520 − £3392 = £128. £3528 is the value of Account A on its own, not the difference between the two accounts. £3392 is the value of Account B on its own, not the difference.)
- (c) 40 — Working out successive terms shows where the sequence is heading, but the terms themselves keep changing — the limit is the value where the sequence stops changing, so x_{n+1} = x_n = L there. Substituting into the rule: L = 0.5L + 20. Subtracting 0.5L from both sides: L − 0.5L = 20, so 0.5L = 20, and L = 20 ÷ 0.5 = 40. The individual terms are x_1 = 0.5 × 0 + 20 = 20, x_2 = 0.5 × 20 + 20 = 30 and x_3 = 0.5 × 30 + 20 = 35, getting closer to this value but not equal to it — 35 is only the third term, not the limit. Multiplying by 0.5 instead of dividing at the final step, 20 × 0.5 = 10, undoes the rearrangement rather than completing it, and gives a value smaller than terms the sequence has already passed. Writing the fixed-point equation with the wrong sign, L = 0.5L − 20, gives 0.5L = −20 and L = −40, which cannot be right since every term in the sequence is positive and increasing. The value the sequence is approaching is 40.
- (c) 183 mg — Apply the decay, then add the new dose, once for each hour. Hour 1: 0.7 × 200 = 140, then 140 + 50 = 190. Hour 2: 0.7 × 190 = 133, then 133 + 50 = 183, so there is 183 mg after 2 hours. Forgetting the top-up dose and only applying the decay gives 0.7 × 200 = 140, then 0.7 × 140 = 98 — this ignores that a further 50 mg is given every hour. Adding the 50 mg BEFORE the decay is applied, instead of after, gives 0.7 × (200 + 50) = 175, then 0.7 × (175 + 50) = 157.5, which changes how much of the dose is eliminated in the same hour it is given. Multiplying by 0.3, the percentage ELIMINATED, instead of by 0.7, the percentage REMAINING, gives 0.3 × 200 + 50 = 110, then 0.3 × 110 + 50 = 83 — this mixes up the amount that leaves the bloodstream with the amount that stays in it. Always check whether a percentage describes what remains or what is removed before choosing the multiplier.
- (d) 4 years — Apply the recurrence repeatedly. V_1 = 0.85 × 18000 = 15300. V_2 = 0.85 × 15300 = 13005. V_3 = 0.85 × 13005 = 11054.25. V_4 = 0.85 × 11054.25 = 9396.1125. V_3 = £11054.25 is still above £10000, but V_4 = £9396.11 has dropped below it, so the answer is 4 years. Stopping at V_3 and calling it '3 years' misreads £11054.25 as already below £10000, or comes from wrongly modelling the fall as a flat £2700 a year (15% of the original value each time, without compounding), which crosses £10000 a year too early. Continuing one extra step to V_5 = 0.85 × 9396.1125 = 7986.70 and calling it '5 years' overshoots, since the value had already dropped below £10000 at V_4. Doubling the percentage decrease to 30% by mistake gives V_1 = 0.7 × 18000 = 12600, then V_2 = 0.7 × 12600 = 8820, which is already below £10000 after only 2 years — the wrong rate crosses the threshold too fast.
- (a) £150 — Value after year 1: £800 × 0.75 = £600. Value after year 2: £600 × 0.75 = £450. The loss during the second year alone is £600 − £450 = £150. £450 comes from giving the value remaining after 2 years, not the amount lost during the second year. £200 comes from working out the loss during the first year instead of the second: £800 − £600 = £200. £350 comes from working out the total loss over both years instead of just the second year's loss: £800 − £450 = £350.
- (d) £6705 — After the first year: £6400 × 1.08 = £6912. After the second year: £6912 × 0.97 = £6704.64, which rounds to £6705 (nearest pound). £6720 comes from treating the +8% and −3% changes as a single net +5% change applied to the original amount instead of applying each change in turn: £6400 × 1.05 = £6720. £6912 comes from applying only the first year's growth and stopping there, without applying the second year's fall. £7104 comes from adding the two percentages together as +11% and applying that to the original amount instead of applying each change to the correct starting amount in turn: £6400 × 1.11 = £7104.
- (d) 100 — Rearrange L = 0.6L + 40 by collecting the L terms on one side: L − 0.6L = 40, which gives 0.4L = 40, then L = 40 ÷ 0.4 = 100. Subtracting the other way round, 0.6L − L = 40, gives −0.4L = 40, then L = 40 ÷ (−0.4) = −100 — a sign error that flips the answer negative even though a long-run value here must be positive. Ignoring the 0.6L term completely and solving L = 40 directly gives 40, which throws away the recurrence's own multiplier. Dividing 40 by 0.6 instead of by the correct coefficient 0.4 gives 40 ÷ 0.6 ≈ 66.7, a slip that comes from dividing by the coefficient of L on the RIGHT of the original equation rather than by what is left once the L terms are collected on one side. Always collect the L terms first, then divide by whatever coefficient of L remains.
- (a) £14224 — Value after 2 years: £15000 × 1.04 × 1.04 = £16224. Money left after buying the trailer: £16224 − £2000 = £14224. £14200 comes from treating the two 4% increases as a single flat 8% increase applied once instead of compounding: £15000 × 1.08 = £16200, and £16200 − £2000 = £14200. £13600 comes from applying the 4% increase only once, for 1 year instead of 2: £15000 × 1.04 = £15600, and £15600 − £2000 = £13600. £18224 comes from adding the £2000 instead of subtracting it: £16224 + £2000 = £18224.
- (c) £2717.20 — The recurrence B_{n+1} = 1.02B_n − 200 must be applied once for each month, using the previous month's balance each time. Starting from B_0 = 3000: 3000 × 1.02 = 3060, so B_1 = 3060 − 200 = 2860. Then 2860 × 1.02 = 2917.2, so B_2 = 2917.2 − 200 = 2717.2. Stopping after one month leaves B_1 = £2860.00, not the balance after two months. Applying two months of interest together, 1.02² = 1.0404, and 3000 × 1.0404 = 3121.2, and then subtracting 400 in one go, 3121.2 − 400 = 2721.2, does not reproduce the recurrence, because the second month's interest should be earned on the balance after the first repayment, not on the original £3000. Subtracting £200 twice from B_1 without adding a second month of interest, 2860 − 200 = 2660, drops the interest for the second month altogether. The balance after 2 months is £2717.20.
- (c) £2743.60 — Each year the balance is multiplied by 1.03. After the first year: 4000 × 1.03 = 4120. After the second year: 4120 × 1.03 = 4243.60, so that is what Leah takes out. She then spends £1500 of it, which leaves 4243.60 − 1500 = 2743.60. She has £2743.60 left.
- (d) £7060 — A 6% decrease each year means the value becomes 100% − 6% = 94% of the previous year's value, and 94% = 0.94, so the multiplier is 0.94. Apply it once for each of the 3 years: £8500 × 0.94 = £7990 after 1 year, £7990 × 0.94 = £7510.60 after 2 years, £7510.60 × 0.94 = £7059.96 after 3 years, which rounds to £7060 to the nearest pound. (£6970 comes from using simple depreciation instead of compound, taking 6% of the original £8500 three times: £8500 − 3 × £510 = £6970. £7990 is the value after only 1 year, forgetting the remaining 2 years. £7511 is the value after only 2 years, £8500 × 0.94² = £7510.60, forgetting the third year.)
- (d) 218 — The rule x_{n+1} = 0.8x_n + 50 must be applied once for each step, using the result of the previous step every time — not the same starting value repeated. Starting from x_0 = 200: 0.8 × 200 = 160, so x_1 = 160 + 50 = 210. Then 0.8 × 210 = 168, so x_2 = 168 + 50 = 218. Stopping after one iteration leaves x_1 = 210, not x_2. Applying only the multiplier twice without adding 50 at each step uses 0.8² = 0.64, and 0.64 × 200 = 128, which drops the 50 completely. Adding 50 twice at the end instead of once per step, 128 + 100 = 228, still does not reproduce the actual recurrence, because the 50 added at the first step is itself multiplied by 0.8 at the second step. After two iterations, x_2 = 218.
- (d) £8262 — A fall of 15% is a multiplier of 0.85 and a fall of 10% is a multiplier of 0.9, and each multiplier acts on the value at the start of its own year. After year 1: 12000 × 0.85 = 10200. After year 2: 10200 × 0.9 = 9180. After year 3: 9180 × 0.9 = 8262. The value 3 years after the car was bought is £8262. Adding the percentages to make a single fall of 35% would be wrong, because the later falls are taken from smaller values.
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