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.
part Higher
Growth and decay, compound interest worksheet — GCSE Higher
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- 1.There are 2500 electric cars registered in a town. The number is predicted to increase by 6% each year. Work out the predicted number of electric cars after 3 years, to the nearest whole number.
- 2.The value of a rare coin increases by 12% each year. The coin is currently worth £270. Work out the value of the coin after 2 years, giving your answer to the nearest penny.
- 3.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.
- 4.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.
- 5.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.
- 6.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.
- 7.A savings account starts with £500. Each year, 4% interest is added, and then £30 is withdrawn from the account. Which recurrence correctly models the balance, £S_n, after n years, with S_0 = 500?
- 8.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.
- 9.A population of fish in a lake is modelled by the recurrence P_{n+1} = 1.1P_n − 30, where P_n is the population after n years, 30 fish are removed by fishing each year, and P_0 = 400. After how many complete years does the population first exceed 460?
- 10.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.
- 11.The concentration of a pollutant in a lake, in arbitrary units, follows the recurrence C_{n+1} = 0.75C_n + 40, with C_0 = 500: each week, 25% of the pollutant breaks down naturally, and then a further 40 units enter the lake from run-off. An ecologist classifies the lake as safe once C_n first drops below 300. Find the first whole number of weeks after which the lake is safe.
- 12.A savings account pays 3.5% compound interest each year. Bilal invests £1200. Work out how much interest, in total, he earns after 2 years, to the nearest penny.
- 13.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.
- 14.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.
- 15.£5000 is invested in an account paying 4% compound interest each year. Work out the total interest earned after 3 years.
Answer key
- (a) 2978 — A rise of 6% is a multiplier of 1.06, applied once for each year. After year 1: 2500 × 1.06 = 2650. After year 2: 2650 × 1.06 = 2809. After year 3: 2809 × 1.06 = 2977.54, which is 2978 to the nearest whole number. Multiplying by 1.18 in one go would be wrong, because the second and third years grow from larger numbers than the first.
- (c) £338.69 — To increase by 12% each year, multiply by 1.12 twice. £270 × 1.12 × 1.12 = £338.688, which rounds to £338.69 (nearest penny, since the third decimal place is 8). £334.80 comes from treating the two 12% increases as a single flat 24% increase applied once instead of compounding: £270 × 1.24 = £334.80. £302.40 comes from applying the 12% increase only once, for 1 year instead of 2: £270 × 1.12 = £302.40. £338.68 comes from rounding £338.688 down to the nearest penny instead of up.
- (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.
- (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.
- (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.)
- (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.
- (a) S_{n+1} = 1.04S_n − 30 — Adding 4% interest multiplies the balance by 1 + 0.04 = 1.04. Withdrawing £30 afterwards subtracts a fixed 30, giving S_{n+1} = 1.04S_n − 30. Writing +30 instead of −30 mistakes a withdrawal for a deposit — the £30 leaves the account, so it must be subtracted. Writing 0.96 instead of 1.04 treats the 4% as a decrease rather than an increase, as if the interest were shrinking the balance instead of growing it. Writing 1.4 instead of 1.04 turns 4% into 40%, a common slip when converting a percentage to a multiplier — 4% as a decimal is 0.04, so the multiplier is 1.04, not 1.4. Always convert the percentage to a decimal first, then add 1 for growth or subtract from 1 for decay, before applying any fixed amount that is added or removed.
- (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.
- (b) 5 years — The recurrence P_{n+1} = 1.1P_n − 30 must be applied once per year, checking after each application whether the population has passed 460. Starting from P_0 = 400: 400 × 1.1 − 30 = 410, so P_1 = 410. Then 410 × 1.1 − 30 = 421, so P_2 = 421. Then 421 × 1.1 − 30 = 433.1, so P_3 = 433.1. Then 433.1 × 1.1 − 30 = 446.41, so P_4 = 446.41, which is still below 460. Then 446.41 × 1.1 − 30 = 461.051, so P_5 = 461.051, the first value above 460. The population first exceeds 460 after 5 complete years. Stopping at P_4 = 446.41 and reporting 4 years reports the last year the population was still below 460, not the first year it was above. Counting the starting value P_0 = 400 as a year of growth makes P_5 the sixth number in the list and gives 6 years, but P_0 is the population before any year has passed, so P_5 is reached after 5 years, not 6. Reading "exceed 460" as "exceed the starting population of 400" instead gives P_1 = 410, already above 400, and 1 year — but the threshold named in the question is 460, not the starting value, so always check every value against the number actually stated in the question.
- (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.
- (a) 4 weeks — Apply the recurrence week by week. C_1 = 0.75 × 500 + 40 = 375 + 40 = 415. C_2 = 0.75 × 415 + 40 = 311.25 + 40 = 351.25. C_3 = 0.75 × 351.25 + 40 = 263.4375 + 40 = 303.4375. C_4 = 0.75 × 303.4375 + 40 = 227.578125 + 40 = 267.578125. C_3 = 303.4375 is still above 300, but C_4 = 267.58 has dropped below it, so the lake first becomes safe after 4 weeks. Taking 25% of the ORIGINAL 500 every week instead of 25% of the current amount, a flat 125 each time, gives 500 − 125 + 40 = 415, then 415 − 125 + 40 = 330, then 330 − 125 + 40 = 245, which crosses 300 a week too early and gives the wrong answer of 3 weeks. Continuing one extra step to C_5 = 0.75 × 267.578125 + 40 = 200.68 + 40 = 240.68 and calling it 5 weeks overshoots, since the concentration had already dropped below 300 at C_4. Forgetting the 40 units of run-off each week and only applying the decay gives C_1 = 0.75 × 500 = 375, then C_2 = 0.75 × 375 = 281.25 — this is already below 300 after only 2 weeks, because without the run-off the concentration falls much faster.
- (a) £85.47 — Value after 2 years: £1200 × 1.035 × 1.035 = £1285.47 (nearest penny). Interest earned = £1285.47 − £1200 = £85.47. £1285.47 is the total value of the account, not the interest earned on top of the original £1200. £84.00 comes from using simple interest instead of compound interest: £1200 × 0.035 × 2 = £84.00. £42.00 comes from working out only the first year's interest and stopping there: £1200 × 0.035 = £42.00.
- (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.
- (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.
- (c) £624.32 — A 4% rise is a multiplier of 1.04, applied once each year. After year 1: 5000 × 1.04 = 5200. After year 2: 5200 × 1.04 = 5408. After year 3: 5408 × 1.04 = 5624.32. The question asks for the interest, not the value of the account, so take away the amount invested at the start: 5624.32 − 5000 = 624.32. The total interest earned is £624.32.
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