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Stage 5.1

7.06 Visualising compound interest

Interactive practice questions

Paul used repeated applications of simple interest to calculate how much an investment of $\$2000$$2000 would grow over $3$3 years if it accrued compound interest at a rate of $22%$22% p.a., compounding annually.

  Balance + interest Total balance Interest earned
Start of investment $-$ $\$2000.00$$2000.00 $\$440.00$$440.00
First year $\$2000.00+\$440.00$$2000.00+$440.00 $\$2440.00$$2440.00 $\$536.80$$536.80
Second year $\$2440.00+\$536.80$$2440.00+$536.80 $\$2976.80$$2976.80 $\$654.90$$654.90
Third year $\$2976.80+\$654.90$$2976.80+$654.90 $\$3631.70$$3631.70 $-$
a

Using the information from the table, which of the following table of values shows the relationship between investment value and the number of years that have passed?

No. years $0$0 $1$1 $2$2 $3$3
Investment value ($\$$$) $2000$2000 $2440$2440 $2976.8$2976.8 $3631.7$3631.7
A
No. years $0$0 $1$1 $2$2 $3$3
Investment value ($\$$$) $440$440 $536.8$536.8 $654.9$654.9 $798.97$798.97
B
No. years $1$1 $2$2 $3$3 $4$4
Investment value ($\$$$) $2000$2000 $2440$2440 $2976.8$2976.8 $3631.7$3631.7
C
No. years $1$1 $2$2 $3$3 $4$4
Investment value ($\$$$) $440$440 $536.8$536.8 $654.9$654.9 $798.97$798.97
D
b

Which of the following graphs correctly shows the relationship between the number of years passed and the value of the investment?

Loading Graph...

A

Loading Graph...

B

Loading Graph...

C

Loading Graph...

D
c

Is the growth of the investment linear or non-linear?

Linear

A

Non-linear

B

Neither

C

It is too difficult to determine

D
Easy
2min

Amy used repeated applications of simple interest to calculate how much an investment of $\$300$$300 would grow over $3$3 years if it accrued compound interest at a rate of $23%$23% p.a., compounding annually.

Easy
1min

Sharon used repeated applications of simple interest to calculate how the value of a boat currently valued at $\$500$$500 would decrease over $3$3 years if it depreciated at a rate of $26%$26% per year.

Medium
1min

Which of the following graphs could represent a savings account that earns compound interest over $50$50 years?

Easy
< 1min
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MA5.1-4NA

solves financial problems involving earning, spending and investing money

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