Calculate Investment Interest

Use mathematical modelling to solve applied problems involving growth and decay, including financial contexts; formulate problems, choosing to apply linear, quadratic or exponential models; evaluate and modify models and report assumptions, methods and findings.

Worked example

1. Write down list of information$P = 24\,200,\quad A = 30\,356.48,\quad n = 2$
2. Find a formula (memorise it)$A = P(1 + i)^{n}$
3. Substitute correct values into formula$30\,356.48 = 24\,200(1 + i)^{2}$
4. Remember $i = \frac{\%}{\text{times per year}}$ as a decimal, and $n = \text{times per year} \times \text{number of years}$
5. Solve for the asked value$(1+i)^{2} = 1.2544 \ \therefore \ 1 + i = 1.12 \ \therefore \ i = 12\%$

Practice

Complete the following using the compound interest formula: