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2.02 Compound interest

Interactive practice questions

Which three of the following statements about compound interest are true?

Interest is earned on the principal.

A

The interest in any time period is calculated using only the original principal.

B

Interest is earned on any accumulated interest.

C

The amount of interest earned in any time period changes from one period to the next.

D
Easy
< 1min

$\$8000$$8000 is invested for $3$3 years at a rate of $3%$3% p.a. compounded annually.

Easy
6min

$\$3000$$3000 is invested at $4%$4% p.a., compounded annually. The table below tracks the growth of the principal over three years.

Easy
5min

A $\$7510$$7510 investment earns interest at $4.5%$4.5% p.a. compounded annually over $6$6 years. Use the compound interest formula to calculate the value of this investment to the nearest cent.

Easy
2min
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Outcomes

1.1.1.6

apply percentage increase or decrease in various contexts, e.g. determining the impact of inflation on costs and wages over time, calculating percentage mark-ups and discounts, calculating GST, calculating profit or loss in absolute and percentage terms, and calculating simple and compound interest

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