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compound interest formula

E-Maths: Problems on Compound Interest

O Level Maths Tuition Formula to calculate total amount in a compound interest question is provided in GCE O-Level E-Maths examinations so students don't have to memorise.

It is therefore important for students to know how to use the compound interest formula.

Notice in these two questions, the frequency of compounding affects the value of r and n so it affects the total amount as well.

I always share with my students in my weekly O-Level Maths tuition classes to put themselves in the shoes of a banker who helps their client to grow their money. The frequency of compounding is just like the frequency they meet their client and at each meeting they need to inform how much rate their money has grown based on the frequency of compound.

E-Math: Compound Interest Formula (Plus A Tricky Question)

Photo Credit:purpleslog

In today post,I'm going to talk about some concepts related to everyday life, we call this everyday Math. As you see the image on the side, you know I'm going to talk about money and where is money being 'stored'? Well, safely in the bank! So have you wondered why banks give you interest (peanuts though) for doing you a service of keeping your money safely? Should they charge you?

Today we are going to discuss about interest, compound interest in particular. I would strongly suggest you read these 2 posts before attempting the question first.

  1. Simple & Compound Interest
  2. Formula Usage on Simple & Compound Interest

These 2 posts discuss the basic concepts on the differences between Simple and Compound Interest as well as what you should note when using the formulas.

I came across the following question while doing an exampaper analysis for my student recently and it so coincides with the topics I want to discuss this week.

Example:

compound-interest-qn

Do the question yourself and check your level of understanding. It should take you 2 minutes.

Spot the error!

Common mistake (click here for image). Did you make this mistake too? Do you know where the error is?

Lesson Learnt

The correct working is shown here. (click)

compound-interest-formula-summary

Test out your understanding

If the original question is modified to compounded half-yearly with the principle amount of $75 000 being deposited at the same rate of 1.8% per annum, calculate the total amount at the end of 1 year. What would be your answer? Leave your answer in the comment section.