text: # mathsWatch
  
  Announcements
  Thread starter 2 years ago
  #1
  compound and simple interest
  0
  reply
  2 years ago
  #2
  Do you have a question?
  0
  reply
  Thread starter 2 years ago
  #3
  (Original post by xenobiologist)
  Do you have a question?
  No, I just needed explanation on how to solve the problems involving compound and simple interest.
  0
  reply
  2 years ago
  #4
  Simple interest is basically the same amount of interest every year.
  So for example we have £1000 with a simple interest rate of 5% and we leave it in there for 3 years.
  
  5% of £1000 is £50 so we get £50 every year. so 50 * 3 = 150 and we would have £1150 at the end of 3 years.
  
  Now, if we have £1000 with a COMPOUND interest rate of 5% and we leave it in there for 3 years :
  
  5% of £1000 is £50 so for the first year we get £50, so now we have £1050 in the bank, for compund interest instead of adding £50 each each like we did before, we work out 5% of the new value so 5% of £1050 is £52.5 so after the second year we have 1050+52.5 = 1102.5 and for our final year we work out the 5% of 1102.5 and add it on.
  
  Now that is the long way of working out compound interest problems, what happens if we are asked to find the 50th years value? Sure, we can probable spend 50/60mins in the exam trying to figure it out and mess up halfway through without realizing but there is an easier way.
  
  Firstly convert 5% into a multiplier (5% is 1.05, 10% is 1.1, 25% is 1.25 etc you get the idea)
  Then get your base value which is £1000 in our case, and then multiply it by the multiplier to the power of how many years you want it to:
  
  heres an example because im bad at explaining ; £1000 x 1.05^50
  
  £1000 is our base value, 1.05 is our 5% multiplier and ^50 is 1.05 to the power 50 because we want 50 years.
  0
  reply
  X
  
  Write a reply...
  Reply
  new posts
  Back
  to top
  Latest
  My Feed
  
  ### Oops, nobody has postedin the last few hours.
  
  Why not re-start the conversation?
  
  see more
  
  ### See more of what you like onThe Student Room
  
  You can personalise what you see on TSR. Tell us a little about yourself to get started.
  
  ### University open days
  
  • Norwich University of the Arts
  Postgraduate Open Day Postgraduate
  Thu, 23 Jan '20
  • SOAS University of London
  Development Studies, Interdisciplinary Studies, Anthropology and Sociology, Languages, Cultures and Linguistics, Arts, Economics, Law, History, Religions and Philosophies, Politics and International Studies, Finance and Management, East Asian Languages & Cultures Postgraduate
  Sat, 25 Jan '20
  • University of Huddersfield
  Undergraduate Open Day Undergraduate
  Sat, 25 Jan '20
  
  ### Poll
  
  Join the discussion
  
  0 (76)
  15.08%
  1 (70)
  13.89%
  2 (65)
  12.9%
  20.44%
  20.24%
  5 (88)
  17.46%
  
  View All
  Latest
  My Feed
  
  ### Oops, nobody has postedin the last few hours.
  
  Why not re-start the conversation?
  
  ### See more of what you like onThe Student Room
  
  You can personalise what you see on TSR. Tell us a little about yourself to get started.
metadata: {"found_math": false, "script_math_tex": 0, "script_math_asciimath": 0, "math_annotations": 0, "math_alttext": 0, "mathml": 0, "mathjax_tag": 0, "mathjax_inline_tex": 0, "mathjax_display_tex": 0, "mathjax_asciimath": 0, "img_math": 0, "codecogs_latex": 0, "wp_latex": 0, "mimetex.cgi": 0, "/images/math/codecogs": 0, "mathtex.cgi": 0, "katex": 0, "math-container": 0, "wp-katex-eq": 0, "align": 0, "equation": 0, "x-ck12": 0, "texerror": 0}