2

NUMBER AND ALGEBRA

INTEREST AND
DEPRECIATION
The value of an investment increases over time as a result of interest being added to it,
whether it be simple or compound interest. On the other hand, the value of assets and
items such as cars and office equipment decreases over time due to age and wear-and-
tear. Compound interest and depreciation use formulas that involve repeated percentage
increase and decrease respectively.

24 New Century Maths 10 Advanced 9780170453509

 Shutterstock.com/TZIDO SUN
Chapter outline Wordbank
allowable deduction A part of a person’s yearly income that
Working mathematically is not taxed, such as work-related expenses and donations to
2.01 Earning an income# U F PS R charities
compound interest Interest calculated on the principal invested
2.02 Income tax# U F PS C
as well as on any accumulated interest
2.03 Simple interest U F PS R depreciation The decrease in the value of items over time due
2.04 Compound interest U F to ageing
net pay Pay received after deductions from gross pay;
2.05 The compound interest U F PS R ‘take-home’ pay
formula
per annum (p.a.) Per year
2.06 Term payments# U F PS R C principal The original amount of money invested or borrowed,
2.07 Depreciation# U F PS R C for the purpose of calculating interest
repayment or instalment The amount of money paid at regular
#
NSW ONLY, NOT AUSTRALIAN CURRICULUM time periods (weekly, fortnightly, monthly) to pay off a loan
simple interest Interest calculated on the original principal
invested only

U = Understanding | F = Fluency | PS = Problem solving | R = Reasoning | C = Communication

9780170453509 Chapter 2 | Interest and depreciation 25

 In this chapter you will:
• calculate weekly, fortnightly, monthly and yearly incomes
• calculate wages, salaries, overtime, commission, piecework and annual leave loading
• use tables to calculate income tax and PAYG tax
• solve problems involving simple interest
• solve problems involving compound interest by repeated percentage increase
• solve problems involving the compound interest formula A = P(1 + r)n
• solve problems involving term payments and depreciation

SkillCheck ANSWERS ON P. 592

Mental
percentages

1 Increase:
a $7000 by 5% b $3955 by 2% c $8600 by 1.6%

Evaluate, correct to the nearest cent:

Percentage
calculations

2
WS
a $5000 × (1.045)4 b $28 000 × (1.03)6
Percentage
Homework
shortcuts
c $15 300 × (1.065)3 d $32 400 × (1.072)10

2.01 Earning an income#

#
NSW ONLY, NOT AUSTRALIAN CURRICULUM

Wages, salaries and overtime

A wage is calculated from the number of
hours worked and is usually paid weekly.
Overtime

Wage earners can make more income by

working extra hours (overtime).

Shutterstock.com/Lyubov Levitskaya
WS

A salary is a fixed annual amount, paid

Homework
Earning

weekly, fortnightly or monthly. Salary earners

money

do not earn overtime pay but can receive

benefits such as a computer, company car,
expense account, shares in the company or
paid medical expenses.

Units of time for wages and salaries

1 year = 12 months
1 fortnight = 2 weeks
1 year = 52 weeks for wage earners
1 year = 52.18 weeks for salary earners

The 2 most common rates of overtime pay are:

• time-and-a-half = 1.5 × normal hourly rate
• double time = 2 × normal hourly rate

26 New Century Maths 10 Advanced 9780170453509

 Example 1
Noor earns $22.65 per hour at normal rates. Last week, she worked 38 hours at normal rates,
6 hours at time-and-a-half and 3 hours at double time. Calculate Noor’s total earnings for the
week.
Solution
Normal pay = $22.65 × 38 Double time pay = 3 × $22.65 × 2
= $860.70 = $135.90 2.01

Time-and-a-half pay = 6 × $22.65 × 1.5 Total earnings = $860.70 + $203.85 + $135.90

= $203.85 = $1200.45

Commission, piecework and annual leave loading

Commission is earned by salespeople
and agents, and is a percentage of the
value of items sold or income made.
Piecework is earned according to
the number of items made or tasks
completed.
Annual leave loading or holiday
loading is extra pay given during
annual leave (holidays) and is 17.5% of

iStock.com/Allard1
4 weeks’ normal pay.

Example 2
Georgia is a real estate agent and is paid a commission of 2.5% A retainer is a fixed
on the value of apartments she sells. She also receives a amount paid regardless of
weekly retainer of $750. How much will Georgia earn if she how many items are sold.
sells an apartment for $590 000?
Solution
Commission = 2.5% of $590 000
= $14 750
Total earnings = commission + retainer
= $14 750 + $750
= $15 500
∴ Georgia earns $15 500.

9780170453509 Chapter 2 | Interest and depreciation 27

 Example 3
Emad is a jewellery designer. He makes handmade jewellery and is paid at the following rates:
• $278 per necklace
• $72 per pair of earrings
• $105 per bracelet
This month, Emad made 23 necklaces, 7 pairs of earrings and 19 bracelets. How much did he
earn?
Solution
Monthly earnings = 23 × $278 + 7 × $72 + 19 × $105
= $8893

Example 4
Kham’s annual salary is $70 590. For his Christmas holidays, he received 4 weeks’ normal
pay plus 17.5% annual leave loading for the 4 weeks. Calculate Kham’s:
a normal weekly pay
b annual leave loading
c total pay for the Christmas holiday.
Solution
a Weekly pay = $70 590 ÷ 52.18
= $1352.8171…
≈ $1352.82
b Annual leave loading = 17.5% × $1352.82 × 4     17.5% of 4 weeks' pay
= $946.974
≈ $946.97
c Total holiday pay = (4 × $1352.82) + $946.97     4 weeks' pay + leave loading
= $6358.25

EXERCISE 2.01 ANSWERS ON P. 592

Earning an income U F PS R

Express all answers correct to the nearest cent where necessary.

1 Find the weekly wage for each person.
Mary earns $21.85 per hour and works for 40 hours.
Connor works 8 hours a day, Monday to Friday, and is paid $23.47 per hour.
a

Yoshe works on Monday and Tuesday from 8:30 a.m. until 4:00 p.m. and Thursday
b

from midday until 9:00 p.m., and earns $30.60 per hour.
c

2 Greta earns $19.56 an hour and works for 31 hours each week. Chandler earns
$21.44 per hour for his 27 hours of work. Who earns more per week and by how much?

Foundation Standard Complex

28 New Century Maths 10 Advanced 9780170453509

 3 Maggie earns a salary of $180 640 p.a. How much does she earn:
a each week? b each fortnight? c each month?
4 Rakitu considers 2 jobs, one locally with an annual salary of $57 640 p.a. and the other
one in the city with a fortnightly pay of $2320. Calculate the weekly income for each job,
determine which one pays more per week, and by how much. R
5 Anan works 38 hours at normal rates, 7 hours at time-and-a-half and 4 hours at double
time. Calculate Anan’s total earnings if he earns $19.60 per hour at normal rates.
EXAMPLE
1
2.01

6 Jacqui works 8.5 hours per day from Tuesday to Friday. She is paid $21.78 per hour. She
also works on Saturday for 4.5 hours at a special rate of $24.59 per hour. How much did
Jacqui earn for the week?

7 Idra works the following hours in a week at the clothing chain Shop til U Drop.

Day Hours worked

Monday 9 a.m. – 5 p.m.
Tuesday 9 a.m. – 4 p.m.
Thursday 10 a.m. – 7:30 p.m.
Friday 10 a.m. – 5 p.m.
Saturday 10:30 a.m. – 5 p.m.

She is paid at the following rates.

Day Rate of pay

Monday to Friday $19.62 per hour
Saturday $23.15 per hour
Thursday after 4:00 p.m.

What is Idra’s total income for the week? PS R

8 Fatimah is paid a commission of 2.5% on the value of goods she sells. She also receives a
weekly retainer of $875. How much will Fatimah earn if she sells goods to the value of
EXAMPLE

$41 600 in one week? Select the correct answer A, B, C or D.

2

A $1915 B $1061.88 C $2187.50 D $1018.13

9 Nathan is a real estate agent whose commission is calculated on the value of the
properties he sells:
• 3% paid on first $300 000
• 1.5% paid on next $250 000
• 0.75% paid on any value thereafter
How much commission did Nathan earn for selling a house for $625 000?

10 Briana designed an app, KeyFinder, that sells for $2.49. If she makes 70% profit on the
sale price of each app sold, how much would she make from selling 800 units of this app?

11 Matt charges $60 for each lawn he mows and $45 for trimming hedges in each yard.
In a week, he mows 24 lawns and trims 15 hedges. How much does he earn for the week?
EXAMPLE
3

Foundation Standard Complex

9780170453509 Chapter 2 | Interest and depreciation 29

 12 Clean 2 Swim charges $86 to clean backyard pools. If this business earned $4644 in the
first week of summer, how many pools were cleaned?

13 Jade makes homemade eco-friendly soaps, shampoos and cleaning products. A customer
purchases 3 homemade soaps, 2 bottles of shampoo and 3 of the cleaning sprays.
How much does Jade receive for these purchases?

Shutterstock.com/Volosina

Shutterstock.com/AlenKadr

Shutterstock.com/
Lotus_studio
Homemade soaps $5.60 Eco-friendly shampoo $12.70 Natural cleaning spray $7.25

14 Calculate the annual leave loading for each person if it is 17.5% of 4 weeks’ pay.
a Peter earns $1220 per week b Jamilla earns $2000 per fortnight
c Samir earns $5944 per month d Ellie earns $46 630 p.a.

15 For his annual holidays, Jake received 4 weeks’ normal pay plus 17.5% annual leave
loading for the 4 weeks. If Jake’s annual salary is $50 725, find his:
EXAMPLE
4

a normal weekly pay

b annual leave loading
c total pay for the 4-week holiday.

Investigation
Workers’ entitlements
The Australian Government sets the minimum standards
for pay and conditions for all Australian workers. Different
industries can have different needs from employees in
terms of: Shutterstock.com/j.wootthisak

• normal and overtime hours worked,

breaks allowed
• allowances
• dress codes, such as uniforms
• working conditions
1 Visit the Fair Work Ombudsman website www.fairwork.gov.au and select Awards
and agreements.
Select 2 industries and identify any similarities and differences in the requirements of
those industries.
2

3 Write a summary of your findings.

4 Give a report in class.

Foundation Standard Complex

30 New Century Maths 10 Advanced 9780170453509

 Income tax# 2.02
#
NSW ONLY, NOT AUSTRALIAN CURRICULUM

Income tax WS

Income tax is calculated on a person’s taxable income, which is the gross income (total
earnings) less all allowable deductions, rounded down to the nearest dollar.
Homework
Income tax
tables

Taxable income = gross income − allowable deductions

2.02
WS

The more a person earns, the higher the rate of tax to be paid.
Homework
Income tax
and
Medicare
levy

Tax rates for Australian residents

Taxable income Tax on this income
Income tax
0 – $18 200 Nil
$18 201 – $37 000 19c for each $1 over $18 200
$37 001 – $90 000 $3572 plus 32.5c for each $1 over $37 000
$90 001 – $180 000 $20 797 plus 37c for each $1 over $90 000
$180 001 and over $54 097 plus 45c for each $1 over $180 000
Source: © Australian Taxation Office for the Commonwealth of Australia

Example 5
Sophia earned $62 348 last financial year and collected bank interest of $440.81. She had
allowable deductions of $427.52 in work expenses and $110 in donations to charities.
a Calculate her taxable income.
b Use the tax table to calculate the income tax that Sophie must pay.

Solution
a Taxable income = $62 348 + $440.81 – $427.52 – $110
= $62 251.29
≈ $62 251 Rounded down to the nearest
dollar.
According to the table, a taxable income of $62 251 is in
the $37 001 − $90 000 tax bracket.
b

‘32.5c for each $1’ means

Income tax = $3572 + 0.325 × ($62 251 – $37 000)
32.5% or 0.325
= $11 778.575
≈ $11 778.58

PAYG tax and net pay

Income tax deducted from your pay by your employer every payday is called PAYG (Pay As You
Go) tax. The total amount of PAYG tax paid over the year is usually more than the actual income tax
payable, so at the end of the financial year you will receive the difference as a tax refund.
Gross pay is the total amount a person earns or receives, but most workers have a variety of
deductions taken from their pay before they receive it, and the amount of income left after the
deductions is called net pay.
9780170453509 Chapter 2 | Interest and depreciation 31
 Net pay
Net pay = gross pay − tax − other deductions

Example 6
Jayden earns a gross pay of $2290.33 per
fortnight. His deductions are for PAYG
Fortnightly earnings ($) PAYG tax withheld ($)

tax, $44.10 for private health insurance

2270–2275 460

and $55.82 for superannuation.

2276–2281 462

Use the PAYG tax table to find

2282–2287 464

Jayden’s PAYG tax per fortnight.

a 2288–2293 466

Calculate Jayden’s net pay.

2294–2299 468
b
Calculate Jayden’s total deductions
2300–2305 470

as a percentage of his gross income (correct to one decimal place).

c

Solution
In the table, $2290.33 falls in the $2288 – $2293
range.
a

Fortnightly PAYG tax = $466

Net pay = $2290.33 – ($466 + $44.10 + $55.82) Net pay = gross pay − total
deductions
b
= $1724.41
c Total deductions = $565.92
$565.92 Total deductions
Deductions percentage = × 100% × 100%
$2290.33 Gross pay
= 24.7091…%
≈ 24.7%

EXERCISE 2.02 ANSWERS ON P. 593

Income tax U F PS C

1 Shilpa earns $47 628 in a year and has allowable deductions of $1930.46.
Calculate her taxable income, rounded down to the nearest dollar.
EXAMPLE
5
a
b Use the tax table on page 31 to calculate the income tax that Shilpa must pay.
2 Aiden is an environmental engineer who had a gross income of $118 742 this year and
work-related expenses totalling $4022.80, which are tax-deductible. Calculate Aiden’s:
a taxable income, rounded down to the nearest dollar
b income tax.
3 Ellie is a graphic designer who earns an annual salary of $90 541 and has collected
$1029.45 in bank interest. She has allowable deductions of $379 for tools related to her
work and $287 in donations to charity. Calculate: PS
a Ellie’s taxable income b the amount of tax payable.

Foundation Standard Complex

32 New Century Maths 10 Advanced 9780170453509

 4 Riley the builder had a gross income of $56 922 this year. He is entitled to these tax
deductions: tools $1538, training courses $445 and outdoor protective clothing $506.
How much should Riley pay in tax? Select the correct answer A, B, C or D. PS
A $13 046.65 B $10 855.58 C $9237.73 D $6884.27

5 Nicola is a nurse earning $87 996 per year. Her allowable deductions are the cost of
non-slip footwear $225, the cost of laundering uniforms $1046, and union fees $297.60.
How much should Nicola pay in tax? PS 2.02

6 Will owns a photography business and earned

$196 000 last year. His allowable deductions

Shutterstock.com/Dean Drobot
were Internet costs for his website $968,
photographic equipment $23 672, and travel
to photo shoots $15 930. Calculate the amount
that Will should pay in tax. PS

7 Jackson earns a gross weekly income of

$1075.26. His weekly deductions are $309.11 PAYG tax, $44.55 for private health
insurance and $25.18 for superannuation. Calculate Jackson’s net weekly pay. C
8 Isha earns a gross income of $788.20 per week. Her deductions are $132.44 tax and
$32.24 for private health insurance. Calculate Isha’s net income. C
Use the PAYG table from Example 6 on the previous page to answer questions 9 to 12.
9 Every fortnight, Mr Singh earns $2278 and pays $22.80 in union fees and $94.10 in
superannuation.
EXAMPLE
6

Find how much PAYG tax he pays per fortnight.

Calculate Mr Singh’s fortnightly net pay.
a

What percentage (correct to one decimal place) of his gross pay do the deductions
b

make up?
c

10 Holly earns a gross pay of $2295 per fortnight. Her deductions are PAYG tax, $64.35 for
superannuation and $30 for life insurance. Find Holly’s:
a PAYG tax
b net pay
c total deductions as a percentage of her gross income (correct to one decimal place).
11 Stefan earns $1148 per week.
a If he is paid fortnightly, what is his fortnightly gross pay?
b Find the PAYG tax that is taken out of his gross pay.
Stefan’s deductions are $141.94 for his health fund and $51.33 for superannuation.
Calculate Stefan’s net fortnightly pay.
c

12 Agata earns a salary of $60 135 p.a. Each fortnight she has deductions of $256.20 for
family health insurance and $35 for superannuation taken from her gross income.
a Calculate Agata’s fortnightly gross income.
b How much PAYG tax does she pay per fortnight?
c Calculate Agata’s fortnightly net income.

Foundation Standard Complex

9780170453509 Chapter 2 | Interest and depreciation 33

 13 Copy and complete this pay slip. PS C

Employee: Ziad Chaker Hourly pay rate: $19.65

Hours worked Deductions
Normal 39 Tax: $205.72 Other: $168.38
Time-and-a-half 2 Gross weekly
income
Double time 0 Total deductions
Net weekly income

Technology
Online income tax calculators
The Australian Taxation Office (ATO) website www.ato.gov.au has online calculators for
income tax and PAYG tax. Visit the website and search ‘Simple Tax Calculator’ to find the
income tax calculator for individuals.
1 Enter the taxable income $63 000 as ‘63000’ (no spaces).
2 Select the current financial year.
3 Select ‘Resident for full year’ and click ‘Next’.
4 The estimated tax payable will be shown on a new screen.
5 Repeat for at least 2 more taxable incomes.
Find the PAYG tax calculator and use it to find the PAYG tax payable and net pay for a
gross pay of:
6

a $1408 weekly   b $2870 fortnightly  c $5610 monthly

2.03 Simple interest

WS The simple interest formula

I = Prn, where:
I is the simple interest
Homework
Simple
interest

WS
P is the principal
r is the interest rate per time period, expressed as a decimal
n is the number of time periods
Homework
Simple
interest
table

Simple
interest

Foundation Standard Complex

34 New Century Maths 10 Advanced 9780170453509

 Example 7
Find the simple interest on:
a $4000 at 3.5% p.a. for 6 years
b $13 500 at 5.5% p.a. for 7 months
c $75 640 at 0.42% per month for 2 years

Solution
a P = $4000, r = 3.5% = 0.035, n = 6 years 2.03

I = Prn r = 0.035 per year, n = 6 years, so the time

= $4000 × 0.035 × 6 period is years.
= $840
7
P = $13 500, r = 5.5% = 0.055, n = years r = 0.055 per year, n = 7 months, so we
12
must change 7 months to years so that the
b
I = Prn
= $13 500 × 0.055 ×
7 time period is years.
12
= $433.125
≈ $433.13 rounded to the nearest cent
P = $75 640, r = 0.42% = 0.0042, r = 0.0042 per month, n = 2 years, so we
n = 2 × 12 = 24 months must change 2 years to months so that the
c

I = Prn time period is months.

= $75 640 × 0.0042 × 24
= $7624.512
≈ $7624.51 rounded to the nearest cent

Example 8
Petra invests $17 400 for 2 years at 3.75% p.a. flat rate interest. To what final value will her
investment grow?

Solution
P = $17 400, r = 3.75% = 0.0375, n = 2 years n and r are in years.
I = Prn
= $17 400 × 0.0375 × 2
= $1305
Value of investment = $17 400 + $1305 Principal + interest
= $18 705

Example 9
After 4 years, an investment of $13 000 has earned $1092 in simple interest.
What is the annual interest rate?

Solution
I = $1092, P = $13 000, n = 4 years $1092
I = Prn $52000
r=
= 0.021
$1092 = $13 000 × r × 4
= 2.1%
$1092 = $52 000r
∴ Annual interest rate = 2.1%

9780170453509 Chapter 2 | Interest and depreciation 35

 Example 10
For how many months will $10 000 need to be invested to earn $250 in simple interest at
3.25% p.a.?
Solution
I = $250, P = $10 000, r = 3.25% = 0.0325
I = Prn
$250 = $10 000 × 0.0325 × n
$250 = $325n
$250
n=
$325
= 0.7692… years n is in years, so convert to months
= 0.7692… × 12 months
= 9.230… months
≈ 10 months rounded up to the nearest month

EXERCISE 2.03 ANSWERS ON P. 593

Simple interest U F PS R

In this exercise, round all money answers to the nearest cent.

1 Calculate the simple interest earned on each investment.

$35 000 for 4 years at 3.6% p.a.
EXAMPLE
7
a
b $26 850 at 1.95% p.a. for 2 years
c $8200 invested for 5 months at 3% p.a.
d $6590 invested for 16 months at 0.25% per month
e $5250 invested for 250 days at 1.04% p.a.
f $18 400 invested for 3 years at 0.18% per month

2 Calculate the flat rate interest charged on each loan.

a $1250 for 2 years at 3.5% p.a.
1
$18 900 for 5 years at 5.7% p.a.
2
b
c $1.15 million at 4.5% p.a. for 48 months
d $12 000 for 10 months at 0.575% per month
e $9750 for 2.5 years at 0.48% per month
f $24 720 for 136 days at 7.85% p.a.

3 Harry owed $783.26 on his credit card. The credit card company charged him one
month’s simple interest at 21% p.a. How much interest was he charged?
Select the correct answer A, B, C or D.
A $13.71 B $16.45 C $25.38 D $37.30

Foundation Standard Complex

36 New Century Maths 10 Advanced 9780170453509

 4 Find the final value of each investment using simple interest.
$10 000 invested for 3 years at 4% p.a.
EXAMPLE
a 8

b $1500 invested for 18 months at 0.19% per month

c $8500 invested for 3.5 years at 0.25% per month
d $9250 invested for 50 months at 3.75% p.a.

5 Liong borrowed $6000 to go on an overseas holiday, at 12% p.a. flat rate interest for 2 years.
Calculate:
2.03

a the total interest

b the total amount Liong must repay.

6 The interest on a loan of $2500 over 4 years is $450. Calculate the flat rate of
interest p.a. R
EXAMPLE
9

7 Katy took out a loan for $22 000 over 5 years. If her total loan repayments amounted to
$28 400, calculate: PS R
a the interest charged
b the flat rate of interest p.a., correct to 2 decimal places.

8 After 5 years, the interest on a loan of $8000 amounts to $2340. Calculate the annual
simple interest rate.

9 For how many years will $4200 need to be invested to earn $200 interest, if the interest
rate is 2.5% p.a.? R
EXAMPLE
10

10 How many weeks will it take for $50 000 to earn $750 in interest if the rate is
2.6% p.a.? R

11 How many days will it take for $20 000 to earn $300 in interest if the rate is
4% p.a.? R

12 An online bank offered the following investment to its customers.

• A rate of 2.35% p.a. simple interest for the first 4 months only
• Then the principal and interest reinvested at 0.45% p.a. simple interest

What will Dariya’s investment of $3480 be worth after 7 months?

Select A, B, C or D. PS R
A $31.21 B $374.10 C $3511.21 D $3854.10

13 For how many months will $20 000 need to be invested to amount to $22 000, if interest
is paid at the rate of 0.33% per month? PS R

14 What is the flat rate of interest (as a percentage p.a., correct to one decimal place) when
$1650 earns $85 in interest over 2 years? R

Foundation Standard Complex

9780170453509 Chapter 2 | Interest and depreciation 37

 15 Toula used a credit card to buy a netbook computer for $799 and some extra accessories
for $246. She pays off this debt in 30 days. The credit card charges 22% p.a. simple
interest. PS R
a Calculate the simple interest charged.
b How much will Toula pay after 30 days?

16 Bhashine earned $185 interest each year for 4 years on an investment account.
At the end of the 4 years, she closed her account and withdrew $6000 in total.
What was the annual flat rate of interest paid into Bhashine’s account?
Select A, B, C or D. PS R
A 3.1% B 3.5% C 12.3% D 14.1%

2.04 Compound interest

Most investments earn compound interest, where the interest earned is added to the principal
so that next time, the interest is calculated on a larger principal. This means that more interest
is earned, because we are also earning interest on the interest we have already earned. The word
compound means ‘combined’.

Example 11
A principal of $23 000 is invested at 4% p.a. interest, compounded yearly for 2 years.
a What is the total value of the investment after 2 years?
b What is the amount of compound interest earned?

Solution
a The interest for each year is calculated separately.
After the 1st year:
I = $23 000 × 0.04
= $920
Investment = $23 000 + $920 Principal + interest
= $23 920
After the 2nd year:
I = $23 920 × 0.04
= $956.80
Investment = $23 920 + $956.80 New principal + interest
= $24 876.80
Compound interest earned = final investment – principal
= $24 876.80 – $23 000
b

= $1876.80

Foundation Standard Complex

38 New Century Maths 10 Advanced 9780170453509

Notice that compound interest involves repeated percentage increase. In the above example, to
calculate compound interest on a principal of $23 000 over 2 years at 4% p.a., we are actually
increasing $23 000 by 4% twice. Adding 4% to the principal is the same as increasing the
principal by 4%, which is the same as multiplying the principal by 104% or 1.04.
Investment after 1st year = $23 000 × 1.04 = $23 920
Investment after 2nd year = $23 920 × 1.04 = $24 876.80
We can even combine these 2 steps into one step by repeated percentage increases:
Investment after 2nd year = $23 000 × 1.04 × 1.04 = $24 876.80 2.04

Using repeated percentage increases can simplify our compound interest calculations.

Example 12
A principal of $9000 is invested at 3.7% p.a. compounded yearly over 3 years. What is:
a the value of the investment after 3 years?
b the compound interest earned?
Solution
Adding 3.7% interest to the principal is the same as
multiplying the principal by 1.037.
a

∴ Investment after 3 years = $9000 × 1.037 × 1.037 × 1.037

= $9000 × (1.037)3
= $10 036.4188…
≈ $10 036.42 rounded to the nearest cent.
b Compound interest earned = final investment – original principal
= $10 036.42 – $9000
= $1036.42

EXERCISE 2.04 ANSWERS ON P. 593

Compound interest UF

In this exercise, round all money answers to the nearest cent.

1 A principal of $23 000 is invested at 5% p.a. interest, compounded yearly over 2 years.
EXAMPLE
11

Copy and complete the following working to calculate the value of the investment
after 2 years.
a

After the 1st year:

I = $23 000 × 0.05 Investment = $23 000 + $________
= $________ = $________
After the 2nd year:
I = $________ × 0.05 Investment = $______ + ______
= $________ = $________

Foundation Standard Complex

9780170453509 Chapter 2 | Interest and depreciation 39

 Copy and complete the following working to calculate the amount of compound
interest earned.
b

Compound interest earned = final investment – principal

= $________ – $23 000
= $________

2 Finn invests $15 000 at 2.5% p.a. compounded yearly over 3 years. Show all working
(as in question 1) to find:
a the value of the investment after 3 years
b the total amount of compound interest earned.

3 Selina invests $34 100 at 6.2% p.a. interest compounded yearly over 2 years. Calculate:
a the final value of the investment b the compound interest earned.

4 Use repeated percentage increases to calculate the final value of each investment
compounded annually, then calculate the compound interest earned.
EXAMPLE

$5000 for 2 years at 4% p.a. $27 800 for 3 years at 2.85% p.a.
12
a b
c $9600 for 3 years at 5% p.a. d $39 500 for 2 years at 3% p.a.
e $18 400 for 4 years at 1.25% p.a.

5 For each investment, calculate the compound interest earned.

a $30 400 at 5% p.a. for 3 years b $19 150 at 4.2% p.a. for 2 years
c $8750 at 1.75% p.a. for 2 years d $36 000 at 3.5% p.a. for 3 years
e $18 960 at 6.35% p.a. for 5 years

Mental skills 2: Maths without calculators ANSWERS ON P. 593

1 1
Finding 15%, 2 %, 25% and 12 %
2 2

To find 15% of a number, find 10% and 5% of the number separately, then add.

1 Study each example.

a 15% × 80 = (10% × 80) + (5% × 80) = 8 + 4 = 12
b 15% × $170 = (10% × $170) + (5% × $170) = $17 + $8.50 = $25.50
c 15% × 3600 = (10% × 3600) + (5% × 3600) = 360 + 180 = 540
d 15% × $28 = (10% × $28) + (5% × $28) = $2.80 + $1.40 = $4.20

2 Now find 15% of each amount.

a 120 b $840 c 260 d $202
e $50 f 72 g $180 h 400
i $1600 j $22 k 6000 l $350

Foundation Standard Complex

40 New Century Maths 10 Advanced 9780170453509

 1
To find 2 % of a number, first find 5%, then halve it.
2

3 Study each example.

1 1
2 % × 600 2 % × $820
2 2
a b
10% × 600 = 60 10% × $820 = $82
1 1
5% × 600 = × 60 = 30 5% × $820 = × 82 = $41
2 2
1 1 1 1
2 % × 600 = × 30 = 15 2 % × $820 = × $41 = $20.50
2.04

2 2 2 2

1
Now find 2 % of each amount
2
4
a 400 b 6640 c $2000 d $880
e 1500 f $232 g 5400 h $904
1
To find 25% of a number, halve the number twice as 25% = .
4

5 Study each example.

a 25% × 700 b 25% × $86
1 1
50% × 700 = × 700 = 350 50% × $86 = × $86 = $43
2 2
1 1
25% × 700 = × 350 = 175 ∴25% × $86 = × $43 = $21.50
2 2
6 Now find 25% of each amount.
a 2000 b $80 c 18 d $25
e $324 f $140 g 66 h 298
i $780 j $1700 k $126 l 1160
1 1 1
To find 12 % of a number, find 25% first, then halve it because 12 % = .
2 2 8

7 Study each example.

1 1
12 % × 400 12 % × $144
2 2
a b
1 1
50% × 400 = × 400 = 200 50% × $144 = × $144 = $72
2 2
1 1
25% × 400 = × 200 = 100 25% × $144 = × $72 = $36
2 2
1 1 1 1
12 % × 400 = × 100 = 50 12 % × $144 = × $36 = $18
2 2 2 2

1
Now find 12 % of each amount.
2
8

a 1280 b $12 c 60 d $260

e $540 f $250 g 304 h 1360

9780170453509 Chapter 2 | Interest and depreciation 41

2.05 The compound interest formula
Note the following pattern.
• Final amount of $23 000 at 4% p.a. interest for 2 years = $23 000 × (1.04)2
• Final amount of $9000 at 3.7% p.a. interest for 3 years = $9000 × (1.037)3
Compound

• Final amount of $18 960 at 6.35% p.a. interest for 5 years = $18 960 × (1.0635)5
interest with
annual rests

Compound Compound interest formula

A = P(1 + r)n, where:
interest with
non-annual

A is the total (final) amount of the investment

rests

P is the principal
r is the interest rate per compounding period, expressed as a decimal
Technology
Comparing
interest rates

n is the number of compounding periods

The compound interest is then calculated using this formula:
Compound interest = total amount − principal
Technology
Simple and
compound
interest
calculator
I = A− P

Example 13
For each investment, calculate:
The
compound

the total amount of the investment

interest
formula

the compound interest earned if interest is compounded annually

i

$26 750 is invested at 4% p.a. for 3 years

ii

$52 000 is invested at 3.8% p.a. for 5 years

a
b
Simple and
compound
interest

Solution
P = $26 750, r = 4% = 0.04, n = 3 Compound interest = $30 090.11 – $26 750
= $3340.11
a i ii
A = P (1 + r)n
= $26 750(1 + 0.04)3
Interesting

= $26 750(1.04)3
facts

= $30 090.112…
≈ $30 090.11
The total amount of the
investment is $30.090.11.
b i P = $52 000, r = 3.8% = 0.038, n = 5 ii Compound interest = $62 659.96 – $52 000
A = P (1 + r)n = $10 659.96
= $52 000(1 + 0.038) 5

= $52 000(1.038)5
= $62 659.9597…
≈ $62 659.96

42 New Century Maths 10 Advanced 9780170453509

 Example 14
Calculate the compound interest when $24 500 is invested at 6.3% p.a. for 5 years:
compounded annually compounded monthly.
Compound

a b interest

Solution
a P = $24 500, r = 0.063, n = 5
A = $24 500 (1 + 0.063)5
= $24 500 (1.063)5
2.05

= $33 253.1205…
≈ $33 253.12
I = $33 253.12 – $24 500
= $8753.12
Because interest is compounded monthly, r and n must be expressed in months,
not years.
b

0.063
P = $24 500, r = = 0.00525 per month, n = 5 × 12 = 60 months
12
A = $24 500(1 + 0.005 25)60
= $24 500(1.005 25)60
= $33 543.701 98
≈ $33 543.70
I = $33 543.70 – $24 500
= $9043.70
Note: More interest is earned when it is compounded monthly rather than yearly.
Why do you think this is so?

EXERCISE 2.05 ANSWERS ON P. 593

The compound interest formula U F PS R

In this exercise, round all money answers to the nearest cent.

1 An amount of $13 000 is invested at 5% p.a. interest, compounded annually over 2 years.
EXAMPLE
13

Which expression represents the total value of the investment?

Select the correct answer A, B, C or D.
A 13 000 × 0.05 × 2 B 13 000 (1 + 0.05)2
C 13 000 × (0.05)2 D 13 000 (1 – 0.05)2

2 For each investment, where interest is compounded yearly, calculate:

i the total amount of the investment, A ii the compound interest, I, earned.
a $6500 invested at 7% p.a. for 6 years b $10 000 invested at 8.5% p.a. for 4 years
c $12 240 invested at 1.6% p.a. for 2 years d $34 600 invested at 4.9% p.a. for 5 years
e $8000 invested at 1.75% p.a. for 3 years

Foundation Standard Complex

9780170453509 Chapter 2 | Interest and depreciation 43

 3 Calculate the amount of interest earned on an investment of $6500 if it is invested at
2.5% p.a. compounded annually for 8 years. Select A, B, C or D.
A $131.14 B $832.81 C $1300 D $1419.62

4 Find the amount of interest earned on one million dollars invested at 14.9% p.a.
compounded annually for 6 years.

5 Find the amount of interest charged on a loan of $25 000 if it is borrowed over 10 years
at 8% p.a. compounded annually. Select A, B, C or D.
A $31 250 B $28 973.12 C $28 589.72 D $20 000

6 Yasmin was given $2000 when she turned 3 years old. Her parents invested it at a 2% p.a.
compounded annually. No deposits or withdrawals were made. Which expression can
be used to determine how much money Yasmin had in the account when she turned 16?
Select A, B, C or D. R
A 2000 (1 + 0.02)13 B 2000 (1 + 0.2)13
C 2000 (1 + 0.02)16 D 2000 (1 + 0.2)16

7 For each investment, calculate:

the total amount the interest earned.
EXAMPLE
14
i ii
a $10 000 for 5 years at 2.4% p.a., compounded monthly
Half-yearly means ‘twice a
$35 500 for 10 years at 2% per half-year, compounded
year’ or ‘every 6 months’
half-yearly
b

Quarterly means ‘4 times

$8900 for 2 years at 3% p.a., compounded quarterly
per year’ or ‘every 3 months’
c
$42 000 for 5 years at 0.225% per month, compounded
monthly
d

e $16 500 for 3 years at 2.6% p.a., compounded half-yearly

f $4900 for 1 year at 0.005% per day, compounded daily

8 Find the total value of an investment of $4300 over 5 years at 4.6% p.a. interest,
compounded every 6 months. Select A, B, C or D.
A $4817.78 B $5384.27 C $5397.90 D $8506.24
Reese invested $6000 for 2 years at a flat rate of 5% p.a. Calculate the amount of
interest earned.
9 a 

Tegan invested $6000 for 2 years at an interest rate of 5% p.a. compounded annually.
Calculate the amount of interest earned.
b

c Whose investment earned more interest? How much more?

Foundation Standard Complex

44 New Century Maths 10 Advanced 9780170453509

 10 A principal of $5000 is invested at 3.5% p.a. for 3 years. Match each compounding period
for this investment to its correct expression for the final value of the expression.

0.035 
3×2

A 5000  1 +
2 

a compounded yearly 

0.035 
3 × 12

B 5000  1 +
12 

b compounded half-yearly 

0.035 
3× 4

C 5000  1 +
2.05

4 

c compounded quarterly 

d compounded monthly D 5000 (1 + 0.035)3
11 Lisa is setting up a trust account for her new grandson Stefan. In 18 years time, she wants the
investment to be worth $30 000, to help with the cost of university fees or the purchase of a
car. Suppose the interest rate for the account is 2.94% p.a. compounding yearly. PS R
a How much should Lisa invest now to achieve the $30 000 target?
If Lisa opened a trust account that earns 2.94% p.a. compounding monthly instead,
how much less would she need to invest?
b

12 Zoe is 5 years old and about to start school. Her parents want to invest $25 000, for her
high school education expenses, in an account that earns 3% p.a. over 7 years. R
a Calculate the total interest earned if interest is compounded:
i yearly ii half-yearly iii quarterly iv monthly
b Which compounding period should Zoe’s parents choose? Why?

13 A principal of $10 000 is invested for 4 years, earning interest at the rate of 3% p.a.,
compounded monthly. Which expression represents the total value of the investment?
Select A, B, C or D.
3  3 
4 48

10 000  1 + 10 000  1 +
100  100 
 
A  B 
 
3  3 
4 48

10 000 ×  1 + 10 000  1 +
 1200  1200 
 
C D 


Technology
Comparing simple with compound interest
In this activity, you will compare the interest
earned on an investment of $1000 for 10 years at 8%
p.a. simple interest and 8% p.a. compound interest,
Spreadsheets

compounded annually.
1 Create this spreadsheet. The principal (P) is
entered in cell A1 and the annual interest rates
(in decimal form) in cells B1 and C1.
2 To calculate the simple interest in column B,
in cell B4 enter the formula =$A$1*$B$1*A4.
Now Fill Down from cell B4 to B13.

Foundation Standard Complex

9780170453509 Chapter 2 | Interest and depreciation 45

 3 To calculate the compound interest in column C, in cell C4 enter the formula
=$A$1*(1+$C$1)^ A4-$A$1. Now Fill Down from cell C4 to C13.
4 Highlight cells A3 to C13. Insert ‘Scatter with Smooth lines and markers’.
5 When the interest rate is the same, which account pays better interest: simple or
compound interest? (Type your answer in cell A15)
6 Now compare the interest earned on an investment of $1000 for 10 years at 9% p.a.
simple interest and 7% p.a. compound interest, compounded annually. Change the
interest rates in cells B1 (0.09) and C1 (0.07) respectively.
Answer the following questions in the spreadsheet cells indicated in brackets.
7 After how many years did the compound interest rate pay more than the simple interest
rate? (A16)
8 How much extra interest did the compound interest rate pay at the end of the 10 years? (A17)
9 Change the interest rate in B1 to 10% (0.1) and C1 to 9% (0.09). How does the change in interest
rate affect the amount of interest paid? Include calculations to justify your answer. (A18)
10 Change the interest rate in B1 to 12% (0.12) and C1 to 8.5% (0.085). After how many
years did the amount of compound interest earned overtake the amount of simple
interest earned? (A19)
11 What is the difference in the amount of compound interest earned for the 10-year period
compared to the simple interest investment? Is it a significant amount? Justify your answer.
(A20)

2.06 Term payments#

#
NSW ONLY, NOT AUSTRALIAN CURRICULUM

Many customers buy expensive household items on terms, which means ‘paying off’ the item by
regular instalments over time, after paying a deposit. A term payments plan is also called hire-
purchase because the purchaser actually hires the item until it is completely paid off. Special offers
can include interest-free periods, but there may be other conditions such as establishment fees and
Technology
Term
paymentss

extra charges if the regular repayments are not paid on time. Also, if the purchaser fails to keep up
with the payments, higher interest may be charged or the item may be repossessed (taken back).

Example 15
Sonia purchases a new fridge and dishwasher package valued at $4925. She pays a 10% deposit
and repays the balance in monthly repayments over 3 years. Interest on the balance is charged
at a flat rate of 12% p.a.
Find:
the deposit paid
the balance owing
a

the interest charged on the balance

b

the total to be repaid

c

the amount of each monthly repayment

d

the total price paid for the package.

e
f

46 New Century Maths 10 Advanced 9780170453509

 Solution
a Deposit = 10% × $4925
= $492.50
b Balance owing = $4925 – $492.50 or 90% × $4925
= $4432.50
c Interest charged on the balance is flat or simple interest.
P = $4432.50, r = 0.12, n = 3
2.06

I = Prn
= $4432.50 × 0.12 × 3
= $1595.70
Total to be repaid = balance + interest Number of repayments = 3 × 12
= 36
d e
= $4432.50 + $1595.70
Monthly repayment = $6028.20 ÷ 36
= $6028.20
= $167.45
f Total price paid = deposit + total repayments or cash price + interest
= $492.50 + $6028.20 = $4925 + $1595.70
= $6520.70

Deferred payment plan

With a deferred payment plan, the customer does not make
any repayments until a later date, such as after 6 months.
Deferred means ‘delayed’.

Example 16
Ilhea and Robert purchase a $1600 home theatre system on a deferred payment plan over 2
years. They make no repayments for the first 3 months, then pay $105 per month.
a Calculate the total repayments.
b How much interest did they pay?
c Ilhea and Robert were also charged the following fees for the plan.
• One-off establishment fee of $25
• Account service fee of $4.95 per month
i How much was paid in fees over the 2-year period?
ii What percentage (correct to one decimal place) of the purchase price was paid in fees?
Solution
a Total cost = $105 × 21 2 years − 3 months = 21 months
= $2205
b Interest = total cost – cash price
= $2205 – $1600
= $605

9780170453509 Chapter 2 | Interest and depreciation 47

 $143.80
Total fees paid = $25 + $4.95 × 24 Percentage = × 100%
$1600
= $143.80
c i ii
= 8.9875%
≈ 9.0%

EXERCISE 2.06 ANSWERS ON P. 593

Term payments U F PS R C

In this exercise, round all money answers to the nearest cent.

1 Gaspard purchases a laundry package of washing machine and dryer valued at $1755.
He pays a 10% deposit and repays the balance in 18 months. Interest on the balance is
EXAMPLE

charged at a flat rate of 13.85% p.a. Find: PS R C

15

a the deposit Gaspard paid b the balance owing

c the interest charged on the balance d the total to be repaid
e the amount of each monthly instalment f the total price paid for the package

2 Maree bought a backyard swimming pool for $25 500. She paid a 5% deposit and
will repay the balance over 5 years, with flat-rate interest charged 8.6% p.a.
Calculate: PS R C
a the deposit b the balance owing
c the interest charged d the total to be repaid
e the monthly instalment f the total price paid.

3 Sarah wants to buy a new 3-piece lounge suite that

she saw advertised at the lounge sale pictured, costing
$6895. R
a How much deposit will she have to pay?
b What will be the flat-rate interest on the balance?
c Find the size of each monthly repayment.

4 Peter pays a $1200 deposit on his holiday and then

$185 per month for a year. The cash price of the
holiday is $2700.
a How much did Peter pay for his holiday?
b Calculate the interest paid.
Calculate the balance owing after the deposit was
paid.
c

Calculate, as a percentage correct to one decimal place, the flat interest rate
charged p.a.
d

Foundation Standard Complex

48 New Century Maths 10 Advanced 9780170453509

 5 Mrs Mitchell buys a used car for her daughter by paying a 20% deposit and
$275 per month for 4 years. If the car has a cash price of $10 400, find: R C
a the deposit Mrs Mitchell paid
b the balance owing after the deposit is paid
c the total amount Mrs Mitchell repaid in instalments
d the interest charged
e the flat interest rate (p.a.), correct to one decimal place. 2.06

6 Xuan wanted to buy a new smartphone costing $1044.

How much deposit did she pay?
R C

a
b What is the total amount repaid in repayments for the smartphone?
c Calculate the total interest paid for the year.
d What was the annual flat interest rate for this purchase, correct to 1 decimal place?

LATEST SMART

Alamy Stock Photo/STANCA SANDA

PHONES
ON SALE NOW!

Pay 10% deposit now and

12 monthly payments of $128

7 Diego bought a laptop priced at $800 on a deferred payment plan: nothing to pay for
3 months and then 9 monthly payments of $110. However, a monthly account fee of
$6.95 was added to the plan. PS R
EXAMPLE
16

Find the total cost of the laptop to Derek.

‘in excess’ means ‘above’
a
b How much in excess of the cash price was paid? or ‘more than’
c What was the flat rate of interest p.a. (correct to one decimal place) charged?

8 Tahlia bought a new outdoor setting and BBQ for her backyard that retails for $2899.
She paid $300 deposit, no payments for 6 months and then fortnightly payments of $63
for 2 years. PS R
a Find the balance owing after Tahlia had paid the deposit.
b Calculate the total cost of the outdoor setting and BBQ.
c How much in excess of the cash price did Tahlia pay under this plan?
d What is the annual flat rate of interest charged, correct to one decimal place?

9 Sofia bought a home cinema system priced at $2100 on interest-free terms for one year
with no repayments for the first 4 months. R
a If Sofia makes 8 equal monthly repayments, what is the amount of each payment?
There is a service charge of $12.95 every month for this deferred payment plan.
What percentage (correct to one decimal place) of the purchase price was paid in
b

service charges?

Foundation Standard Complex

9780170453509 Chapter 2 | Interest and depreciation 49

2.07 Depreciation#
#
NSW ONLY, NOT AUSTRALIAN CURRICULUM

Depreciation is the decrease in value of an item over time. When items lose value because of
age or frequency of use, they are said to depreciate.
The compound interest formula can be adapted to find the depreciated value of an item. While
compound interest involves repeated percentage increases, depreciation involves repeated
percentage decreases, so its formula has a minus sign.

Depreciation formula
A = P(1 − r)n, where:
A is the final value of the item
P is the original value of the item
r is the rate of depreciation per period, expressed as a decimal
n is the number of periods of depreciation
The amount of depreciation is then calculated using this formula:
Depreciation = original value − final value

Example 17
An accountant’s computer system depreciates by 15% each year.
a If the computer system is currently valued at $2600, what will its value be in 5 years?
b What is the depreciation over this time?

Solution
a P = $2600, r = 15% = 0.15, n = 5
A = P(1 – r)n
= $2600 (1 – 0.15)5
= $2600 (0.85)5
= $1153.6338…
≈ $1153.63
The value of the computer system in 5 years will be $1153.63.
Depreciation = $2600 – $1153.63 original value − final value
= $1446.37
b

50 New Century Maths 10 Advanced 9780170453509

 Example 18
An industrial oven in a restaurant originally costs $19 800, then depreciates at a rate of
12% p.a.
a Find the value of the oven after 6 years, correct to the nearest dollar.
Express the depreciated value as a percentage of the cost price, correct to one deci-
mal place.
b

Solution 2.07

a P = $19 800, r = 0.12, n = 6

A = P (1 – r)n
= $19 800 (1 – 0.12)6
= $19 800 (0.88)6
= $9195.2009…
≈ $9195

$9195
Percentage of cost price = × 100%
$19800
b

= 46.4393… %
≈ 46.4%
This means that after 6 years, the oven is worth approximately 46% of its original price
(or has lost 54% of its original value).

Shutterstock.com/otnaydur

9780170453509 Chapter 2 | Interest and depreciation 51

 EXERCISE 2.07 ANSWERS ON P. 593
Depreciation U F PS R C

In this exercise, round all money answers to the nearest cent.

1 Find the value of a photocopier after 5 years if its purchase price was $2850 and the
annual depreciation rate is 20%.
EXAMPLE
17

Find the value of a car after 7 years if it is purchased new for $49 990 and it
depreciates at 12% p.a.
2 a 

2 b Find the amount of depreciation over this time.

3 For each item shown in the table, calculate:
i its value after 4 years of depreciation
ii its value after 4 years as a percentage of its original value, correct to one decimal place.
Item Original value Depreciation rate (p.a.)
a Stove $1100 12%
b Fishing boat $38 500 18%
c Library $8460 12%
d Computer $2500 20%
e Furniture $27 500 15.5%
f Bike $2900 22%
g Electrical tools $870 17.5%
h Air conditioner $2600 9%

Shutterstock.com/Viktorus

4 A smartphone originally valued at $1729 depreciates at 37% p.a.

What percentage (to 2 decimal places where necessary) of the original value
R
EXAMPLE
18

remains after:
a

1 year? 3 years? 6 years?

Approximately how long would it take the smartphone to halve its original value?
i ii iii
b

Foundation Standard Complex

52 New Century Maths 10 Advanced 9780170453509

 5 A security system costs a company $12 500 to buy new. It depreciates at a yearly
rate of 20%.
a Find the value of the system after:
i 1 year ii 2 years iii 5 years
Find the value of the system after 5 years as a percentage of its original value.
Answer correct to one decimal place.
b

6 Parveen pays $25 490 for a new car. The car will depreciate in value by an average of 2.07

11% p.a.
a Find correct to the nearest dollar the market value of the car in 3 years.
b Calculate the amount of depreciation in the car after 3 years.

7 Adam has spent $175 000 on equipment to set up his hairdressing salon. The equipment
depreciates at 20% per year. R
a Find the value of the equipment after 4 years.
b Find the amount of depreciation in the equipment after 4 years.
Find, by trial and error, how long it will take for the value to be over $50 000.
Answer in years and months.
c

Find the value of Adam’s equipment after 9 years as a percentage of its original
value, correct to one decimal place.
d

8 Kamal says that, at 10% p.a. depreciation, a car will lose half its value after 7 years.

Is he correct? Show all working to justify your answer. PS R C

9 Office equipment that is worth $12 000 when

new, depreciates at 15% p.a. as shown in the
Year Depreciated value

table. PS R C
0 $12 000

How much did the office equipment lose in

1 $10 200

value in the first year?

a 2 $8670

After how many years did the office equipment

3 $7369.50

fall below half its original value?

b 4 $6264.08

By how much did the office equipment

5 $5324.46

depreciate between the 5th and 6th years?

c 6 $4525.79
7 $3846.93

Will the value of the office equipment ever fall 8 $3269.89

below $100?
d
9 $2779.40

Will the value of the office equipment ever be

10 $2362.49

zero?
e
11 $2008.12
12 $1706.90
13 $1450.87
14 $1233.24

Foundation Standard Complex

9780170453509 Chapter 2 | Interest and depreciation 53

 Power plus ANSWERS ON P. 594
How long, in years and days, will it take an investment of $3000 to earn $500 in simple
+

interest at 4% p.a.?
1

What amount should Owen invest to earn $100 in simple interest if the investment will
last for 9 months and the interest rate is 3% p.a.?
2

A principal of $10 000 is invested for 5 years at an interest rate of 5% p.a., with interest
compounded weekly. Calculate the final value of the investment.
3

Meghan needs $80 000 in 4 yearsʼ time. What amount should she invest now at an
interest rate of 6% p.a., with interest compounded annually, to reach her target?
4

A painting appreciates in value at a rate of 3% p.a. while a computer depreciates in value

at a rate of 10% p.a. If I bought the painting for $1200 and the computer for $1500 new,
5

what would be their combined value in 5 years time?

A bacteria colony is growing at a rate of 20% per hour. If there are 10 000 bacteria now,
use the compound interest formula to calculate how many there will be after 1 day.
6

(Give your answer correct to the nearest 10 000.)

You invest $2000 in a bank account at an interest rate of 4% p.a. with interest
compounded annually. How long will it take for your investment to double in value?
7 a 

If you invested $4000 instead of $2000 at the same interest rate, how long will it take
to double in value?
b

c Does the size of the principal make any difference to the time taken for it to double?

54 New Century Maths 10 Advanced 9780170453509

 CHAPTER 2 REVIEW Qz

Money and
finance

Language of maths
allowable deductions annual leave loading compound interest deposit
depreciation double time flat rate fortnightly
gross pay income tax interest net pay

CHAPTER 2 REVIEW
overtime PAYG tax per annum (p.a.) principal
quarterly repayment salary simple interest
taxable income term payments time-and-a-half wage
1 When investing, why is compound interest better than simple interest?
2 What do the P and r stand for in the formulas I = Prn and A = P(1 + r)n ?
3 What is another name for flat-rate interest?
4 What word means a decrease in the value of an item over time?
5 Why is gross pay higher than net pay?
6 Use a dictionary to find at least 2 different meanings of principal.

Topic summary
• Which parts of this chapter were revision of Year 9 knowledge and skills?
WS

• Which parts of this chapter were new to you?

Homework
Mind map:
Interest and

• Do you know how to use the simple interest and compound interest formulas?
depreciation

• How is income tax calculated?

• How is the depreciation formula similar to the compound interest formula?
Print (or copy) and complete this mind map of the topic, adding detail to its branches and using
pictures, symbols and colour where needed. Ask your teacher to check your work.

Earning an Income tax Simple interest

income

INTEREST AND
DEPRECIATION
Compound interest

Depreciation

Term payments

9780170453509 Chapter 2 | Interest and depreciation 55

 TEST YOURSELF 2 ANSWERS ON P. 594

In this exercise, round all money answers to the nearest cent.

1 Hayley is paid a commission of 2.5% on the value of the properties she sells. She also receives
a weekly retainer of $1150. How much will Hayley earn if she sells a house for $475 830?
2.01

2 Caleb earns a salary of $70 400 p.a. How much is he paid each week?
TEST YOURSELF 2

2.01

3 A supermarket cashier is employed under the following award.

2.01
Normal rate: $21.45 per hour
Normal rate For 0 to 38 hours worked
Time-and-a-half For the next 4 hours worked
Double time For each hour worked after that

Calculate the wage for working:

a 40 hours b 46 hours.

4 For his Christmas holidays, Jacan received 4 weeks normal pay plus 17.5% annual leave
loading for the 4 weeks. If Jacan’s annual salary is $54 920, find:
2.01

a his normal weekly pay

b his leave loading
c his total pay for the 4-week holiday.

5 Alia earns a salary of $68 650 p.a. Her allowable deductions are donations to charities of
$540 and work-related expenses of $385.
2.02

a Calculate Alia’s taxable income.

b Use the tax table on page 31 to calculate the income tax Alia should pay.

6 Calculate the simple interest earned on each investment.

$20 000 invested for 3 years at 4% p.a.
2.03
a
b $7850 invested at 2.5% p.a for 15 months
c $4500 invested for 6 months at 0.17% per month
d $25 200 invested for 100 days at 3.45% p.a.

7 An amount of $5000 is invested at 2.35% p.a. interest, compounded annually over 3 years.
What is the total value of the investment after 3 years?
2.04
a
b What is the amount of compound interest earned?

Foundation Standard Complex

56 New Century Maths 10 Advanced 9780170453509

 8 Calculate the value of the investment when $34 200 is invested at 3% p.a. for 2 years, with
interest compounded annually.
2.05

9 Find the final value if $11 000 is invested for 4 years at 2.4% p.a., with interest compounded
monthly.
2.05

10 Find the interest earned when $4895 is invested at 1.95% p.a. for 3 years, with interest
compounded annually.
2.05

11 Calculate the interest earned when $46 230 is invested for 9 years at 2.8% p.a., with interest

TEST YOURSELF 2
compounded half-yearly.
2.05

12 Yang purchases a furniture package valued at $4875. She pays a 10% deposit and repays
the balance in 36 monthly instalments. Interest on the balance is charged at a flat rate of
2.06

14.5% p.a. Find:

a the deposit Yang paid
b the balance owing
c the interest charged
d the total to be repaid
e the amount of each instalment
f the total price Yang paid for the package.

13 Caroline bought a new car for $24 990, which depreciates by 10% p.a.
Find correct to the nearest dollar the depreciated value of the car after 5 years.
2.07
a
b What is the depreciation over this time?
Express the depreciated value as a percentage of the original price (correct to one
decimal place).
c

Foundation Standard Complex

9780170453509 Chapter 2 | Interest and depreciation 57