Revision Notes

1.13.1 Compound Interest

What is compound interest?

  • Compound interest is where interest is paid on the interest from the year (or whatever time frame is being used) before as well as on the original amount
  • This is different from simple interest where interest is only paid on the original amount

How do you work with compound interest?

  • For COMPOUND changes (can be a decrease as well as an increase):
    • Keep multiplying by the decimal equivalent of the percentage you want
  • Otherwise do the same as normal:
  • Identify “before” & “after” quantities
  • FIND percentage we want:
    • Increase – ADD percentage to 100
    • Decrease – SUBTRACT from 100
  • Write down a STATEMENT connecting “before” and “after”:
    • “after is a percentage of before”
  • Write down the statement as an EQUATION using decimal equivalent
    • remember “is” means “=”

Exam Tip

This method works for any Compound Change – increase or decrease.

Remembering “✕ m ✕ m ✕ m = ✕ m3″ can make life a lot quicker:

It is usually much easier to multiply by decimal equivalent raised to a power than to multiply by the decimal equivalent several times in a row.

Worked Example

Compound Interest Example, IGCSE & GCSE Maths revision notes


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