Cambridge IGCSE Mathematics (0580)

Simple & Compound Interest Complete Exam Revision & Practice

1. Key Revision Notes

Simple and compound interest are core financial math skills tested on Cambridge IGCSE Mathematics (0580) Paper 1, 2, 3, and 4.

Simple Interest

Calculates interest only on the initial principal amount each year. The interest added remains constant every period.

Interest Formula:
I = (P × R × T) / 100

Total Amount:
A = P + I

Compound Interest & Depreciation

Calculates growth or decay on the current accumulated value each period.

Growth Formula:
A = P × (1 + r/100)^n

Depreciation (Decay) Formula:
A = P × (1 - r/100)^n

Key Exam Tips:

  • Depreciation: Remember to subtract the percentage rate (1 - r/100) instead of adding it.
  • Money Rounding: Always round final currency answers to 2 decimal places (e.g., $432.50).
  • Multipliers: Express 1 + r/100 or 1 - r/100 as a single multiplier (e.g., a 15% depreciation gives a multiplier of 0.85).

2. Live Interactive Calculator & Growth Graph

Adjust the values below to see how linear simple interest compares to exponential compound growth over time.

Simple Interest Total: $1,250.00

Compound Interest Total: $1,276.28

Bonus Difference: $26.28

3. Quick Concept Check

Q1: What does simple interest calculate interest on?

Q2: What multiplier is used for a compound depreciation rate of 12% per year?

4. IGCSE Exam-Style Practice Questions

Core [Paper 1 & 3]

Question 1 (Simple Interest - Basic)

Tanya invests $600 in a savings account that pays simple interest at a rate of 3.5% per year. Calculate the total interest she earns after 4 years. [2 marks]

I = (600 × 3.5 × 4) / 100 [1 mark]
I = $84 [1 mark]
Core [Paper 1 & 3]

Question 2 (Compound Interest - Total Amount)

Liam deposits $2,500 into a bank account paying compound interest at a rate of 2.8% per annum. Calculate the total amount in the account at the end of 3 years. Give your answer correct to 2 decimal places. [3 marks]

A = 2500 × (1 + 2.8/100)^3 or 2500 × (1.028)^3 [1 mark]
A = 2500 × 1.086381696 = $2,715.95424... [1 mark]
Final Answer: $2,715.95 [1 mark]
Extended [Paper 2 & 4]

Question 3 (Reverse Calculation - Finding Principal)

Chen receives $84 in simple interest after investing a sum of money for 3 years at a rate of 4% per year. Calculate the original sum of money Chen invested. [2 marks]

84 = (P × 4 × 3) / 100 => 84 = 12P / 100 [1 mark]
12P = 8400 => P = $700 [1 mark]
Extended [Paper 2 & 4]

Question 4 (Compound Depreciation)

A school buys a minibus for $32,000. The value of the minibus depreciates exponentially at a rate of 14% each year.

(a) Calculate the value of the minibus at the end of 4 years. Give your answer correct to the nearest dollar. [3 marks]
(b) Calculate the total loss in value over these 4 years. [1 mark]

(a) Multiplier = 1 - 0.14 = 0.86 [1 mark]
Value = 32000 × (0.86)^4 = 32000 × 0.54700816 = $17,504.26 [1 mark]
Final Answer (nearest dollar) = $17,504 [1 mark]

(b) Total Loss = $32,000 - $17,504 = $14,496 [1 mark]