Compound interest
With compound interest, each year's interest is added to the balance and then earns interest itself. Follow it year by year.
Task 1Interest on interest4 questions
With compound interest, each year's interest is added to the balance. The next year's interest is worked out on that bigger balance.
To add 10% to a balance, multiply it by 1.1. That figure is 100% plus 10%, written as a decimal. Do it once for each year.
| Year | Balance at start | Interest | Balance at end |
|---|---|---|---|
| 1 | 1,000.00 | 100.00 | 1,100.00 |
| 2 | 1,100.00 | 110.00 | 1,210.00 |
Thorn & Vale puts £2,000 into an account that pays compound interest of 5% a year. Nothing is taken out.
Task 2Compound against simple4 questions
Task 3Several years in one sum2 questions