Compound Interest & Finance Quiz

1. What is the difference between simple interest and compound interest?

1. Compound interest only applies to savings accounts
2. Simple interest is always higher
3. Simple interest is calculated on the original principal only; compound interest is calculated on principal plus accumulated interest
4. They are calculated the same way

2. £1,000 is invested at 5% simple interest per year for 3 years. What is the total interest earned?

1. £100
2. £150
3. £157.63
4. £50

3. What is the compound interest formula for the final amount A?

1. A = P + PRT
2. A = P × r × t
3. A = P(1 + r)ᵗ
4. A = P(1 + r/100)ᵗ

4. £2,000 is invested at 4% compound interest per year for 2 years. What is the final amount?

1. £2,080
2. £2,160
3. £2,163.20
4. £2,166.40

5. A car bought for £12,000 depreciates at 15% per year. What is it worth after 3 years?

1. £6,141.75
2. £7,380.00
3. £7,395.15
4. £8,700.00

6. What is the 'multiplier' for an increase of 12%?

1. 0.12
2. 0.88
3. 1.12
4. 1.88

7. A house is worth £250,000. It increases in value by 6% each year for 3 years. What is it worth at the end?

1. £295,000
2. £297,754
3. £297,911
4. £300,000

8. A salary of £30,000 increases by 3% each year for 4 years. What is the approximate final salary?

1. £30,900
2. £33,050
3. £33,778
4. £36,000

9. What is a 'reverse percentage'?

1. Calculating compound interest backwards
2. Calculating what percentage one number is of another
3. Converting a percentage to a decimal
4. Finding the original value before a percentage change was applied

10. After a 25% increase, a price is £75. What was the original price?

1. £100
2. £50
3. £56.25
4. £60

11. A TV costs £630 after a 10% VAT is added. What is the pre-VAT price?

1. £540
2. £560
3. £567
4. £580

12. You exchange £200 to euros at a rate of 1.18 euros per pound. How many euros do you get?

1. 169.49 euros
2. 200 euros
3. 218 euros
4. 236 euros

13. You have 300 Australian dollars. The exchange rate is 1 AUD = £0.54. How many pounds is this?

1. £154
2. £162
3. £162.16
4. £555.56

14. A worker earns £28,000 per year. They pay no tax on the first £12,570. They pay 20% on income above this. How much income tax do they pay?

1. £2,514
2. £3,086
3. £5,600
4. £5,800

15. What is APR in the context of borrowing?

1. Adjusted Principal Rate — the rate after inflation
2. Annual Percentage Rate — the yearly cost of borrowing, including fees
3. Annual Principal Repayment — the yearly principal payment
4. Average Payment Rate — the mean monthly payment

16. £5,000 is invested at 3% compound interest per year. How many years does it take to exceed £5,450?

1. 2 years
2. 3 years
3. 4 years
4. 5 years

17. A population of 8,000 grows at 2.5% per year. What is the population after 4 years?

1. 8,800
2. 8,824
3. 8,827
4. 9,000

18. A washing machine costs £450 cash or £80 deposit plus 12 monthly payments of £38. How much extra do you pay on the monthly plan?

1. £36
2. £46
3. £86
4. £96

19. An investment doubles in value using compound interest at 10% per year. Approximately how many years does this take? (Use the Rule of 72)

1. 10 years
2. 12 years
3. 7 years
4. 7.2 years

20. A loan of £3,000 is taken at 8% compound interest for 2 years. How much interest is owed in total?

1. £480
2. £480.00
3. £499.20
4. £524.16