Compound interest graphs 1 State whether the following graphs could represent a savings account that earns compound interest over 50 years: a b 4+ Balance (8) ‘Time (years) + Balance ( ‘4 Balance (8) ‘Time (Years) ‘Time (years) 2. Consider the following graph showing two investments, one with simple interest (Investment A) and another with compound, interest (Investment B) ‘fTnivestmpnty (STOOD) a Which investment has a higher principal amount? b Which investment has a higher final amount after 10 years? ¢ After how many years will the investments be equal in value? > ime (yeags) r2a4so7 8 9 wit (© Mathspace Pty Ltd 20213. $1000 is invested for 10 years with an interest rate of 10% per annum that includes the accumulated interest. a Isthis an example of simple or compound interest? Explain your answer. b_ Sketch a graph showing the growth of the investment, 4 Paul used repeated applications of simple interest to calculate how much an investment of $2000 would grow over 3 years if it earned compound interest at a rate of 22% p.a., compounded annually: Year Balance + interest Value Interest earned Start of investment, 0 $2000.00 $440 First year, 1 $2000.00 + $440.00 $2440.00 $536.80 Second year, 2 $2440.00 + $536.80 $2976.80 $654.90 Third year, 3 $2976.80 + $654.90 $3631.70 a. Plot the relationship between the number of years passed and the value of the investment. b_ Isthe growth of the investment linear or non-linear? 5 Amy used repeated applications of simple interest to calculate how much an investment of $300 would grow over 3 years if it eared compound interest at a rate of 23% p.a., compounded annually: Year Balance + interest Value Interest earned Start of investment, 0 - $300.00 $69.00 First year, 1 $300.00 + $69.00 $369.00 $84.87 Second year, 2 $369.00 + $84.87 $453.87 $104.39 ‘Third year, 3 $453.87 + $104.39 $558.26 - a. Plot the relationship between the number of years passed and the value of the. investment. b_ Isthe growth of the investment linear or non-linear? (© Mathspace Pty Ltd 20216 William used repeated applications of simple interest to calculate how much an investment of $400 would grow over 3 years if it earned interest at a flat rate of 6% p.a., compounded annually: Year Balance + interest Value Interest earned Start of investment, 0 - $400.00 $24.00 First year, 1 $400.00 + $24.00 $424.00 $24.00 Second year, 2 $424.00 + $24.00 $448.00 $24.00 ‘Third year, 3 $448.00 + $24.00 $472.00, - a Plot the relationship between the number of years passed and the value of the, investment. b_ Isthe growth of the investment linear or non-linear? 7 Sharon used repeated applications of simple interest to calculate how the value of a boat currently valued at $500 would decrease over 3 years if it depreciated at a rate of 26% per year: Year Balance + interest Value Depreciation Current value, 0 $500.00 $130.00, First year, 1 $500.00 — $130.00 $370.00 $96.20 Second year, 2 $370.00 — $96.20 $273.80 $71.19 Third year $273.80 — $71.19 $202.61 a. Plot the relationship between the number of years passed and the value of the boat. b_ Isthe depreciation of the boat's value linear or non-linear? 8 Luke invests $50 into an account which accumulates interest at a rate of 8% p.a., compounded annually. Plot the relationship between the number of years passed and Luke's account balance. b How many years will it take for the account to reach a total value of $200? 9. Skye invests $700 into an account which accumulates interest at a rate of 9% p.a., compounded annually. a Plot the relationship between the number of years passed and Skye's account balance. b How many years will it take for the account to reach a total value of $2800? (© Mathspace Pty Ltd 202110 2 The value of a coin valued at $900 appreciates in value at a rate of 8% per year. a Plot the relationship between the number of years passed and the coin’s value b How many years will it take for the coin's value to reach a total value of $2300? The value of a plane valued at $6500 depreciates in value at a rate of 22% per year. a Plot the relationship between the number of years passed and the plane's value. b How many years will it take for the plane's value to reach a value of $1100? Pauline invests $600 into a fund which accumulates interest at a rate of 8% p.a., compounded annually. a Plot the relationship between the number of years passed and the value of Pauline’s, fund. b_ Find the value of the fund be after seven years. Round your answer to the nearest 100 dollars. Jimmy invests $2000 into a fund which accumulates interest at a rate of 6% p.a., compounded annually. a Plot the relationship between the number of years passed and the value of Jimmy's fund. b_ Find the value of the fund be after five years. Round your answer to the nearest 100 dollars. Vincent owns a tank currently valued at $4500 which depreciates at a rate of 28% per year. a Plot the relationship between the number of years passed and the value of Vincent's tank. b_ Find the value of the tank after seven years. Round your answer to the nearest 100 dollars, © Mathspace Pty Lid 2021