Simple and compound interest · Grade 10

In Grade 10 you learn: depreciation.

Interest is money paid to you for saving, or charged to you for borrowing. Simple interest is the same every year; compound interest is also paid on the interest already earned, so it grows faster. The same ideas describe depreciation, inflation and hire purchase.

Key facts

• Simple interest: I = P × r × n (r as a decimal, n in years). The total is P + I.
• Compound interest: A = P(1 + r)ⁿ.
• Depreciation (value falls by r each year): A = P(1 − r)ⁿ.
• Compounded monthly: use the monthly rate (r ÷ 12) and the number of months (12n).
• Hire purchase: total paid = deposit + all the instalments. The extra cost is total paid − cash price.
• Inflation raises prices like compound interest.

Worked examples

Other years

• Simple and compound interest · Grade 8
• Simple and compound interest · Grade 9
• Simple and compound interest · Grade 11