IEB Grade 11 Finance, Growth and Decay Cheat Sheet

Finance is about 15 marks of Grade 11 Paper 1. Four formulas and a timeline cover it.

Formulas

• Simple interest: $A=P(1+in)$

• Compound interest and population growth: $A=P(1+i{)}^n$

• Straight-line depreciation: $A=P(1-in)$ (never below R0)

• Reducing-balance depreciation: $A=P(1-i{)}^n$

Nominal and effective rates

• $1+i_{\text{eff}}={\left(1+\frac{i^{(m)}}{m}\right)}^m$, with $m=12$, 4 or 2.

• Compare offers with effective rates.

Timelines

• Mark deposits above, withdrawals below, and rates between the dates.

• Grow each amount to the end date separately, or work stage by stage.

• When the rate or compounding changes, change both $i$ and $n$.

• Unknown deposit: write every amount at the end date in terms of $x$, set equal to the target.

Finding the rate

• Compound: $(1+i{)}^n=\frac{A}{P}\Rightarrow i={\left(\frac{A}{P}\right)}^{\frac{1}{n}}-1$.

• Simple: $i=\frac{\frac{A}{P}-1}{n}$.

Know by heart

• Which growth or decay formula matches the wording (simple, compound, straight-line, reducing balance)

• The effective rate conversion

On the formula sheet

• Simple and compound growth and decay formulas

Common traps

• Using an annual $i$ with $n$ in months.

• Growing a later deposit for the full period.

• Rounding between stages.

Related topics

• compound growth and decay
• nominal and effective interest
• timelines and changing rates