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 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.
- 2.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.
- 3.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.
- 4.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.
- 5.A car is bought for £9000. Its value decreases by 8% each year. Work out its value after 2 years.
- 6.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.
- 7.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.
- 8.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.
- 9.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.
- 10.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.
- 11.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?
- 12.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.
- 13.A population of penguins on an island is 2400. The population is predicted to grow by 7% each year. Work out the predicted population after 2 years, to the nearest whole number.
- 14.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.
- 15.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.
Answer key
- (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.
- (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.)
- (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.
- (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.
- (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.
- (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) £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.
- (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.
- (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.
- (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.
- (d) 2748 — A 7% increase each year means the value becomes 100% + 7% = 107% of the previous year's value, and 107% = 1.07, so the multiplier is 1.07. Multiply by 1.07 for each of the 2 years: 2400 × 1.07 × 1.07 = 2747.76, which rounds to 2748. (2736 comes from using simple growth instead of compound: 2400 + 2 × (2400 × 0.07) = 2736. 2568 is the population after only 1 year, 2400 × 1.07, forgetting the second year's growth. 2747 comes from rounding 2747.76 down instead of up to the nearest whole number.)
- (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.
- (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.
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