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) £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) £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.
- (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.)
- (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.
- (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) £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) 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) 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) 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) £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) £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.
- (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) £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.
- (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.)
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