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
Answer key: Growth and decay, compound interest worksheet — GCSE Higher
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- (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.
- (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.
- (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) £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.
- (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.)
- (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.
- (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.
- (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) £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) £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.)
- (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.
- (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.
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