Name:

Gr 10 Date: Time: 1 HR
CAPS Reference
Finance & Growth
Topic Compound Interest

1. GOT IT! [15 MIN]

Compound Interest is calculated on the sum of the principal amount and any interest that has
since accrued. It continues until the desired time.

Formula: 𝑨𝑨 = 𝑷𝑷 ( 𝟏𝟏 + 𝒊𝒊)𝒏𝒏
𝑹𝑹𝑹𝑹𝑹𝑹𝑹𝑹𝑹𝑹𝑹𝑹𝑹𝑹𝑹𝑹
𝐴𝐴 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎
𝑃𝑃 = 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎
𝑟𝑟
𝑖𝑖 = 𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 −>
100
𝑛𝑛 = 𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑖𝑖𝑖𝑖 𝑦𝑦𝑦𝑦𝑦𝑦𝑦𝑦𝑦𝑦

Example 1:
You invest 𝑅𝑅 3 500 at 7% per annum compound interest for a period of 4 years. Determine
the future amount.

Answer:
𝐴𝐴 = ? 𝑃𝑃 = 3 500
𝐴𝐴 = 𝑃𝑃 ( 1 + 𝑖𝑖)𝑛𝑛
4
7 𝑖𝑖 =
7
𝑛𝑛 = 4
𝐴𝐴 = 3 500 � 1 + � 100
100
𝐴𝐴 = 𝑅𝑅 4 587, 79

2. GO AHEAD [30 MIN]

2.1 Frankie invest 𝑅𝑅14 700 for 8 years at an interest rate of 12,5% per annum,
compounded annually. Calculate the future amount.
2.2 Sam made an investment for 3 years. The bank offered him an interest rate of
10% per annum, compounded annually. Sam made a total of 𝑅𝑅23 691,30, determine
the principal amount.

2.3 You made a profit of 𝑅𝑅 8 574,44 . The investment started off with 𝑅𝑅13 600, was
invested at compound interest for 4 years. Determine the interest rate that you
have received.

2.4 Damon took out a 𝑅𝑅35 000 loan to start up a new business. The loan was
approved at an interest rate of 11,8% p.a., compounded annually for 5 years.
Calculate the future amount.

2.5 Sara had received a large amount of money. She decided the best why was to
invested the 𝑅𝑅150 000. The following two banks offered her a quote. Determine
which bank will be the best investment for Sara.
Options Simple interest rate per annum Term
Bank Alpha 12,6% 3
Bank Beta 8,59% 4

3. CHECK YOUR WORK! [15 MIN]

4. HELPFUL VIDEO
http://math.about.com/od/formulas/a/compound.htm