Everything Maths Grade 10. Chapter 6: Finance and growth.

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9. Finance and growth
Grade 10

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Simple interest
Simple interest is interest calculated only on the initial amount that you invested.

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Compound interest
Compound interest is the interest earned on the principal amount and on its accumulated
interest.

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Compound interest compared to simple interest
Simple interest is a straight line graph while compound interest is an exponential graph.
The graph below shows the comparison for the same principal amount at the same interest
rate. The exponential graph show compound interest and the straight line graph shows
simple interest.

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Hire purchase
Hire purchase loan repayments are calculated using the simple interest formula on the cash
price, less the deposit. Monthly repayments are calculated by dividing the accumulated amount
by the number of months for the repayment.
Inflation
Inflation is the average increase in the price of goods each year and is given as a percentage.
Inflation is calculated using the compound interest formula.
Population growth
Population growth is calculated using the compound interest formula.

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Foreign exchange rates
Different countries have their own currencies. We can convert between our currency (the Rand)
and these currencies using foreign exchange rates.
The foreign exchange rate is the price of one currency in terms of another.

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