Percentages are used in everyday life, for example, calculating discounts during sales and interest rates at banks. Knowing how to find and use percentages is an important skill.

Compound interest problems are much easier to solve by using the **multiplier method**.

For example, a 5% increase on the original balance in a bank would mean there is now 105% in the bank. This is the same as **1.05** as a decimal so this is the **multiplier**.

Calculate the interest on borrowing £40 for 3 years if the compound interest rate is 5% per year.

- Year 1:
- Year 2:
- Year 3:

This calculation can be made more concise by using powers.

To calculate the money in the bank after 3 years the calculation would be:

This can also be written as:

Using powers saves a lot of steps if the time period for the calculation is large.

- Question
£500 is invested in a bank account that receives 3% compound interest per year. How much will be in the bank account after 7 years?

- Question
A car depreciates in value by 8% per year. It was bought for £10,000. How much is it worth after 5 years?