F1.1 Interest and Depreciation

Question 1

Percentage Increase

Answer 1

To increase an amount by P%, multiply the amount by (100 +P)%

Question 2

Percentage Decrease

Answer 2

To decrease an amount by P%, multiply the amount by (100 - P)%

Question 3

Repeated Percentage Change

When one percentage change is followed by a second percentage change multiply the percentages.

Answer 3

Question 4

Percentage Change

Percentage change compares the change in some quantity to the original value of that quantity.

Answer 4

Question 5

Simple Interest

Answer 5

Simple interest is calculated on the original value of the investment or loan

Question 6

Simple Interest Graphs

A simple interest graph is a linear graph where the gradient represents the simple interest earned per year.

Answer 6

Question 7

Compound Interest Formula

Answer 7

Compound interest is added to the principal and reinvested (compounded) so that the investment gets ‘interest on interest’.

Question 8

Compound Interest

The compound interest fromula gives the final value of the investment (Future Value) which includes the amount invested at the start (Present Value).

Answer 8

Question 9

Compounding Periods (n )

The interest rate in a question is generally given ‘per annum’ or ‘per year’. The compounding period however can be daily fornightly, monthly, or quarterly for example. The interest rate, r, and the number of compounding periods, n, must be changed to match the number of compunding periods in a year.

Answer 9

Question 10

Interest Factor Tables

Compound Interest Factor Tables show the compound values of $1 for various interest rates and periods of time.

Answer 10

FV = PV × Interest Factor

Question 11

Depreciation

Answer 11

Depreciation is the loss in value of an asset, such as a car or computer, over time.