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.A trust fund contains £8000. Each year, 5% interest is added, and then £600 is paid out to a charity. Work out the amount remaining in the fund after 2 years.
- 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 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.
- 4.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.
- 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 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.
- 7.£5000 is invested in an account paying 4% compound interest each year. Work out the total interest earned after 3 years.
- 8.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.
- 9.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.
- 10.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.
- 11.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.
- 12.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.
- 13.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.
- 14.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?
- 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) £7590 — Apply interest, then subtract the payment, once for each year. Year 1: 8000 × 1.05 = 8400, then 8400 − 600 = 7800. Year 2: 7800 × 1.05 = 8190, then 8190 − 600 = 7590, so £7590 remains after 2 years. Forgetting the payments altogether and only compounding the interest gives 8000 × 1.05 = 8400, then 8400 × 1.05 = 8820 — this ignores that £600 leaves the fund every year. Subtracting the £600 BEFORE adding interest each year, instead of after, gives (8000 − 600) × 1.05 = 7770, then (7770 − 600) × 1.05 = 7528.50, which changes the order the two operations happen in and so changes the amount that earns interest each year. Subtracting the two payments as one lump sum of £1200 at the very end, from the no-withdrawal total 8820 − 1200 = 7620, ignores that the first £600 withdrawal also stops earning interest during the second year. Always apply interest, then the withdrawal, in that order, once for every single year.
- (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.
- (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.
- (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.
- (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) £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) £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.
- (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.
- (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) £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.)
- (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.
- (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.
- (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.
- (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.
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