 New Zealand
Level 6 - NCEA Level 1

Modelling Compound Interest

Interactive practice questions

The balance of an investment, in dollars, at the end of each year where interest is compounded annually is given by $A_n=1.06A_{n-1}$An=1.06An1, $A_0=5000$A0=5000.

a

State the annual interest rate.

b

Determine the balance at the end of the first year.

c

Use the sequences facility on your calculator to determine the balance at the end of $10$10 years.

Easy
Approx 4 minutes

The balance of an investment, in dollars, at the beginning of each quarter where interest is compounded quarterly is given by $A_n=1.02A_{n-1}$An=1.02An1, $A_1=5000$A1=5000.

The balance of an investment, in dollars, at the end of each month where interest is compounded monthly is given by $A_n=1.015A_{n-1}$An=1.015An1, $A_0=2000$A0=2000.

The investment began at the beginning of January 2010.

$\$50005000 is invested at the beginning of the year in an account that earns $3%$3% per annum interest, compounded annually.

Outcomes

NA6-3

Apply everyday compounding rates

91026

Apply numeric reasoning in solving problems