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Jill takes out a loan of £6000 to get a car. The loan has a compound interest of 3% and she takes it out for 4 years. a) How much interest has Jill accrued after 2 years? b) What is the total amount to be paid after 4 years?

There are 3 rules to answering Maths questions:
1) Am I actually answering the question?
2) Have I answered the whole question? (the question above has two parts)
3) UNITS!

With this question, it's important to realise it's compound interest, meaning you pay interest on your interest.

First, work out how much a 3% increase on the loan is.
Either do this by multiplying £6000 by 1.03 (this is the same as 103%)
Or you can do 6000 x (3/100) to find out the interest, then add the answer to 6000 to work out the total repayment for the first year.

6000 x 1.03 = £6180 for the first year
Or (6000 x (3/100)) + 6000 = £6180

do that for each year, remembering that it's compound interest so for the second year, the sum is £6180 x 1.03, not £6000 x 1.03...

Second year = 6365.3
Third year = 6556.362
Fourth year = 6753.05286

a) How much interest has Jill accrued after 2 years?

At the end of the 2nd year, Jill owes £6365.30 but that's not the answer (remember rule 1). We want to know the interest, not the total repayment.
£6365.30 - £6000 = £365.30

b)  What is the total amount to be paid after 4 years?

We've already calculated 6753.05286, but remember units. We don't pay in less than pennies. So rounding the answer, we get £6753.05

Rebecca W. GCSE Maths tutor, GCSE Biology tutor, Mentoring -Personal ...

4 months ago

Answered by Rebecca, a GCSE Maths tutor with MyTutor


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