Compound Interest Growth and Depreciation - Worksheet-4 Chapter-6 Class VIII DAV

Compound interest refers to the interest earned on the initial principal as well as on the accumulated interest over time. In other words, with compound interest, the interest earned is added to the principal, and then the interest is calculated on the new total.

The formula for compound interest is:

A = P(1 + r/100)^(t)

Where:
A = the final amount
P = the principal (initial investment)
r = the annual interest rate (as a decimal)
n = the number of times the interest is compounded per year
t = the time in years

For example, suppose you invest $1,000 at an annual interest rate of 10% compounded annually for 3 years. Using the formula above, the final amount would be:

A = $1,000(1 + 10/100)^(3)
A = $1,331

So the investment would grow to $1,331 after 3 years with compound interest.

Depreciation, on the other hand, refers to the decrease in value of an asset over time. The formula for straight-line depreciation, which assumes that the asset loses an equal amount of value each year, is:

D = (C - S) / t

Where:
D = the annual depreciation expense
C = the cost of the asset
S = the salvage value (the value of the asset at the end of its useful life)
t = the useful life of the asset in years

For example, suppose you purchase a car for $20,000 with a useful life of 5 years and a salvage value of $5,000. Using the formula above, the annual depreciation expense would be:

D = ($20,000 - $5,000) / 5
D = $3,000

So the car would depreciate by $3,000 per year for 5 years, at which point it would have a salvage value of $5,000.





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