Interest
A standard method from Percentages: the steps and worked examples.
Steps
- Simple interest: I = P × r × n.
- Compound interest: A = P(1 + r/k)^(nk), where k is the number of times per year interest is added (k = 4 for quarterly, 12 for monthly).
- Interest = A − P.
Worked examples
Example 1: $20 000 is deposited at 3% p.a., compounded quarterly, for 2 years. Find the interest, to the nearest dollar.
A = 20 000 × (1 + 3%/4)^(2×4)
= 20 000 × 1.0075⁸
≈ $21 231.98
interest ≈ 21 231.98 − 20 000 ≈ $1 232For the whole topic, read Percentages: key points, common mistakes and how the DSE tests it.