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5.01 Compound interest

Interactive practice questions

$\$3500$$3500 is invested for three years at a rate of $10%$10% p.a., compounding annually.

a

Complete the table below to determine the final value of the investment.

  Balance + interest Total balance Interest earned
First year $-$ $\$3500$$3500 $\$350$$350
Second year $\$3500+\$350$$3500+$350 $\$3850$$3850 $\$385$$385
Third year $\$3850+\$$$3850+$$\editable{}$ $\$$$$\editable{}$ $\$$$$\editable{}$
Fourth year $\$4235$$4235$+$+$\$$$$\editable{}$ $\$$$$\editable{}$ $-$
b

Calculate the total interest earned over the three years.

Easy
Approx 4 minutes
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$\$3200$$3200 is invested for three years at a rate of $6%$6% p.a., compounding annually.

Tara borrows $\$5000$$5000 at a rate of $4.5%$4.5% p.a, compounding annually.

Ivan borrows $\$3000$$3000 at a rate of $6.9%$6.9% p.a, compounding annually.

Outcomes

VCMNA328

Connect the compound interest formula to repeated applications of simple interest using appropriate digital technologies

VCMNA359 (10a)

Describe, interpret and sketch parabolas, hyperbolas, circles and exponential functions and their transformations.

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