Compound Interest & Finance Quiz

Question 1

What is the difference between simple interest and compound interest?

Accepted Answer

Simple interest is calculated on the original principal only; compound interest is calculated on principal plus accumulated interest

Answer

Simple interest is always higher

Answer

Compound interest only applies to savings accounts

Answer

They are calculated the same way

Question 2

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

Accepted Answer

£150

Answer

£50

Answer

£100

Answer

£157.63

Question 3

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

Accepted Answer

A = P(1 + r/100)ᵗ

Answer

A = P(1 + r)ᵗ

Answer

A = P + PRT

Answer

A = P × r × t

Question 4

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

Accepted Answer

£2,163.20

Answer

£2,160

Answer

£2,080

Answer

£2,166.40

Question 5

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

Accepted Answer

£7,395.15

Answer

£6,141.75

Answer

£7,380.00

Answer

£8,700.00

Question 6

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

Accepted Answer

1.12

Answer

0.88

Answer

0.12

Answer

1.88

Question 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?

Accepted Answer

£297,911

Answer

£295,000

Answer

£300,000

Answer

£297,754

Question 8

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

Accepted Answer

£33,778

Answer

£30,900

Answer

£33,050

Answer

£36,000

Question 9

What is a 'reverse percentage'?

Accepted Answer

Finding the original value before a percentage change was applied

Answer

Calculating what percentage one number is of another

Answer

Converting a percentage to a decimal

Answer

Calculating compound interest backwards

Question 10

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

Accepted Answer

£60

Answer

£50

Answer

£56.25

Answer

£100

Question 11

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

Accepted Answer

£560

Answer

£567

Answer

£540

Answer

£580

Question 12

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

Accepted Answer

236 euros

Answer

169.49 euros

Answer

200 euros

Answer

218 euros

Question 13

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

Accepted Answer

£162

Answer

£555.56

Answer

£162.16

Answer

£154

Question 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?

Accepted Answer

£3,086

Answer

£5,600

Answer

£2,514

Answer

£5,800

Question 15

What is APR in the context of borrowing?

Accepted Answer

Annual Percentage Rate — the yearly cost of borrowing, including fees

Answer

Annual Principal Repayment — the yearly principal payment

Answer

Adjusted Principal Rate — the rate after inflation

Answer

Average Payment Rate — the mean monthly payment

Question 16

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

Accepted Answer

3 years

Answer

2 years

Answer

4 years

Answer

5 years

Question 17

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

Accepted Answer

8,827

Answer

8,800

Answer

8,824

Answer

9,000

Question 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?

Accepted Answer

£86

Answer

£36

Answer

£46

Answer

£96

Question 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)

Accepted Answer

7.2 years

Answer

7 years

Answer

10 years

Answer

12 years

Question 20

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

Accepted Answer

£499.20

Answer

£480

Answer

£524.16

Answer

£480.00