GCSE Maths (Edexcel)

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Calculating Compound Interest

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Ratio, Proportion and Rates of Change Ratio, Proportion and Rates of Change

Calculating Compound Interest

8:19 Interest, Growth & Decay
Spec R9 R16
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  • Compound interest is different from simple interest because the amount added after each time period is a percentage of the new amount, not the original amount.
  • Compound interest can be calculated by converting the percentage to a decimal, multiplying it by the starting value, and subtracting this change from the starting amount.
  • Compound interest can also be found by multiplying the initial value by the power of a single decimal.
  • The formula for compound interest is: final amount = initial amount * (1 +/- interest rate/100)^number of time periods.
  • To calculate the value of an account with compound interest, substitute the values into the formula and round to the nearest penny.

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