NZ Level 6 (NZC) Level 1 (NCEA)
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Compound Interest - an Introduction

Interactive practice questions

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

 

Time Period $n$n (years) Value at beginning of time period Value at end of time period Interest earned in time period
$1$1 $\$3000$$3000 $\text{A}$A $\text{B}$B
$2$2 $\text{C}$C $\$3244.80$$3244.80 $\text{D}$D
$3$3 $\$3244.80$$3244.80 $\$3374.59$$3374.59 $\text{E}$E
a

What value should go in cell $\text{A}$A?

b

What value should go in cell $\text{B}$B?

c

What value should go in cell $\text{C}$C?

d

What value should go in cell $\text{D}$D?

e

What value should go in cell $\text{E}$E?

f

What is the total interest earned over the three years?

Easy
Approx 6 minutes
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Dave's investment of $\$6000$$6000 earns interest at $2%$2% p.a, compounded annually over $3$3 years.

Answer the following questions by repeated multiplication.

A $\$2090$$2090 investment earns interest at $4.2%$4.2% p.a. compounded annually over $17$17 years. Use the compound interest formula to calculate the value of this investment to the nearest cent.

Outcomes

NA6-3

Apply everyday compounding rates

91026

Apply numeric reasoning in solving problems

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