12 Further Mathematics

Topic 2: Core – Recursion and Financial Modelling Name……………………

Chapter 8 Modelling Growth and decay using recursion Total

Chapter 9 Modelling and analysing reducing-balance loans and annuities
= / 𝟐𝟏
Revision Lesson 1, Questions 1 - 6
= %
Question 1
Find the first four terms of the sequence defined by the recurrence relation

𝑡0 = 3, 𝑡𝑛+1 = 2𝑡𝑛 + 1

3,7,15,31

(1 mark)

Question 2
The recurrence relation 𝑤𝑛+1 = 3𝑤𝑛 − 4 can be used to generate a sequence.
If 𝑤3 = −1, find 𝑤5 .

(1 mark)

Question 3
A ride-on mower is purchased by a gardening business for $9500. Its value depreciates at a
flat rate of 5% per annum

a) Complete the following table to find the future value of the ride-on mower after 5
years

n Future value after n years ($)

0

(2 marks)
 b) Write a recurrence relation for the future value of the ride-on mower.

(2 marks)

c) Use the recurrence relation to find a rule for the future value of the ride-on mower
after n years.

(2 marks)

d) Use the rule to find the future value of the ride-on mower after 15 years.

(1 mark)

Question 4
Steve Gates paid $50 000 for new computer equipment at the start of the 2012 financial
year. He used flat rate depreciation to revalue the equipment, and at the start of the 2016
financial year he revalued it at $28 000.

a) What is the dollar amount of depreciation from 2012 to 2016?

(1 mark)

b) What was the annual flat rate of depreciation he used, as a percentage of the
purchase price?

(1 mark)
Question 5
A photocopier is purchased by a business for $25 000. It depreciates at a rate of 25 cents
for every 100 copies made. Each year it makes 150 000 copies.

a) Complete the following table to find the future value of the photocopier after 3
years.

n Future value after n years ($)

0

(2 marks)

b) Write a recurrence relation for the future value of the photocopier.

(2 marks)

c) Use the recurrence relation to find a rule for the future value of the photocopier
after n years.

(2 marks)

d) Use the rule to find the future value of the photocopier after 15 years.

(1 mark)
 e) The business anticipates that after the third year of use the photocopier will make
only 120 000 copies a year. Find the future value of the photocopier for both the
fourth and fifth years.

(1 mark)

Question 6
A delivery van was purchased for $80 000. The van’s value depreciates at a rate
of 25 cents per kilometre.

a) Find the value of the van after it has travelled a total distance of
150 000 kilometres.

(1 mark)

b) What is the number of kilometres the van has travelled before it depreciates
to $20 000?

(1 mark)
12 Further Mathematics
Topic 2: Core – Recursion and Financial Modelling Name……………………
Chapter 8 Modelling Growth and decay using recursion Total
Chapter 9 Modelling and analysing reducing-balance loans and annuities
= / 𝟐𝟓
Revision Lesson 2, Questions 7 – 12
= %

Question 7
A business purchased a photocopier for $10 000 in 2014. It is depreciated using reducing
balance depreciation at a rate of 18% per annum. Give all answers to the nearest dollar.

a)
i) Complete the table below.

n Depreciation after n years ($) Future value after n years ($)

0 - 10 000

1 1800 8 200

i) What is the future value of the photocopier after 5 years.

ii) What is the amount of depreciation in the fourth year

(4 marks)
 b) Write down a recurrence relation that gives the value of the photocopier
after n years.

(2 marks)

c) Use the recurrence relation to find a rule for the future value of the photocopier
after n years.

(2 marks)

d) The photocopier is replaced when its value first falls below $3000. At the start of
which year will the copier be replaced?

(1 mark)

e) How much is the photocopier depreciated by in the sixth year?

(1 mark)

Question 8
A truck was bought for $250 000 and is being depreciated on a reducing balance basis rate
of 8% per annum. Use the general rule for reducing balance depreciation after n time
periods to find the future value of the truck after 9 years to the nearest dollar.

(1 mark)
Question 9
Vince bought a car six years ago for $26 500. After being depreciated on a reducing
balance basis, the car is now valued at $9000. Calculate, correct to 1 decimal place, the
percentage annual rate of depreciation of the value of Vince’s car over six years.

(1 mark)

Question 10
Sasha invests $4000 in an account earning 5% p.a. simple interest.

a) Write a recurrence relation for this investment after n years.

(2 marks)

b) Write the general rule for finding the future value of the simple interest
investment after n years.

(2 marks)
c) How much interest will she earn in 6 years?

(1 mark)
d) What amount will her investment grow to in 7 years?

(1 mark)
Question 11
Alan inherits $35 000 and decides to invest it in an account where he earns interest
of 6% p.a. compounded monthly.

a) Write down a recurrence relation that can be used to describe the value of his
investment at the end of each month.

(2 marks)

b) What is the rule for the future value of the investment?

(2 marks)

c) Use the rule to find the value of the investment after 7 years to the nearest cent.

(1 mark)

Question 12
Carina invested $36 000 in a term deposit earning 8.1% p.a. compounding yearly.
Give answers to the nearest cent.

a) What is the value of her investment at the end of five years?

(1 mark)

b) How much interest did she earn?

(1 mark)
12 Further Mathematics
Topic 2: Core – Recursion and Financial Modelling Name……………………
Chapter 8 Modelling Growth and decay using recursion Total
Chapter 9 Modelling and analysing reducing-balance loans and annuities
= / 𝟐𝟏
Revision Lesson 3, Questions 13 – 18
= %

Question 13
How long will it take for an investment of $12 000 to grow to $24 000 if it is invested
at 8% p.a. compounded monthly?

(1 mark)

Question 14
Liana is looking to invest her money. She has done some research and found the best offers
from three different banks.

Bank 1: 8.45% p.a. compounded daily

Bank 2: 8.6% p.a. compounded monthly

Bank 3: 8.7% p.a. compounded half yearly

Which bank should Liana choose? Quote relevant values to support your reasoning.

(2 marks)
Question 15
A housing loan of $450 000 is taken out for 15 years. Interest is charged at 6% per annum
adjusted monthly. The debt is to be repaid in monthly instalments of $3797.

a) Complete the amortisation table below showing the balance remaining after the
first 3 months, giving all values to the nearest cent.

Payment Payment Interest paid ($) Principal Balance

Number made reduction ($) remaining ($)
n ($)
0 0.00 0.00 0.00 450 000.00
1 3797.00 2250.00 1547.00 448 453.00

2 3797.00 2242.27

b)
i. How many monthly payments need to be made until the loan is paid off?

ii. What is the total payment made after the loan has been paid off?

c) Write a recurrence relation for the balance remaining on the loan after n payments

d) Use the recurrence relation to find the balance after 5 months

(7 marks)
Question 16
Carlos borrows $40 000 on 15 March 2016 to landscape his garden. The bank lends him
this amount with interest calculated monthly at a rate of 9.6% per annum. To repay this
loan, Carlos is required to make repayments of $873.69 each month for five years.

a) Determine the amount still owing on 15 July 2016

(1 mark)

b) How much interest is charged during this period?

(1 mark)

Question 17
Karl has taken out a short term personal loan of $20 000 for a gap year trip to Europe. The
interest rate is 18% p.a. compounding quarterly and it needs to be repaid by making four
quarterly payments of $5570.

Answer these questions using the amortisation table of the loan given below.

Payment Payment made Interest paid ($) Principal Balance

number, n ($) reduction ($) remaining ($)
0 0.00 0.00 0.00 20 000.00
1 5570.00 900.00 4670.00 15 330.00
2 5570.00 689.85 4880.15 10 449.85
3 5570.00 470.24 5099.76 5350.09
4 5570.00 240.75 5329.25 20.84
Total 22 280.00 2300.84 19 979.16

a) i. Is the loan paid out exactly after the four payments?

 ii. What should the last payment be to fully pay out the loan?

b) How much total interest does he pay?

c) Write a recurrence relation for the balance remaining on the loan after n payments.

(6 marks)
Question 18
Massimo borrows $140 000 from a building society at 7.5% p.a. compound interest,
adjusted monthly. Find:

a) The monthly repayment if the loan is to be repaid after 15 years.

(1 mark)

b) The total amount repaid on the loan.

(1 mark)

c) The amount of interest paid on the loan.

(1 mark)
12 Further Mathematics
Topic 2: Core – Recursion and Financial Modelling Name……………………

Chapter 8 Modelling Growth and decay using recursion Total

Chapter 9 Modelling and analysing reducing-balance loans and annuities
= / 𝟏𝟒
Revision Lesson 4, Questions 19 – 24
= %
Question 19
Lily borrows $30 000 at a rate of 8.5% per annum, adjusted monthly. She makes
repayments of $650 per month.

a) Find how much is still owing on this loan after two years.

(1 mark)

b) How many repayments are required in order for her to fully repay the loan?

(1 mark)

Question 20
A loan of $200 000 is to be fully repaid over 25 years with quarterly repayments of
$3985.14. Find the interest rate per annum correct to 1 decimal place.

(1 mark)
Question 21
Christian borrows $100 000 at 8% per annum compounding monthly, to be repaid over 10
years with repayments of $1213.28 each month. After 5 years, the interest rate is reduced
to 7.5% per annum.

a) Find the new repayment required for Christian to pay off the loan in the same amount
of time.

(1 mark)

b) How much does Christian save due to the interest rate cut?

(1 mark)

Question 22
Andrew took out a reducing balance loan for $60 000 with interest calculated monthly at a
rate of 10.25% per annum. He makes monthly repayments of $918.41

a) How long will it take Andrew to repay the loan?

(1 mark)
After 3 years, he increases his monthly repayment to $1200.

b) By how many months is the length of the loan reduced?

(1 mark)

c) Find the amount saved in interest by increasing the size of the monthly repayment.

(1 mark)

Question 23
A retired couple has $450 000 invested at 6% per annum adjusted monthly and they
withdraw $3797 every month.

a) Complete the table below showing the value of the investment for the first 3 months,
giving all values to the nearest cent.

Withdrawal Withdrawal Interest earned Principal Value of

number made ($) ($) reduction ($) investment ($)
n
0 0.00 0.00 0.00 450 000.00
1 3797.00 2250.00 1547.00 448 453.00

2 3797.00 2242.27

(2 marks)
b) Write a recurrence relation for the value of the investment after n withdrawals.

(2 marks)

c) Use the recurrence relation to find the value of the investment after 5 months.

(1 mark)

Question 24
Simon purchases a $400 000 annuity. Interest is paid at 8% per annum compounded
monthly. If he receives monthly payments of $3500, how long will the annuity last?
Answer correct to the nearest month.

(1 mark)
12 Further Mathematics
Topic 2: Core – Recursion and Financial Modelling Name……………………

Chapter 8 Modelling Growth and decay using recursion Total

Chapter 9 Modelling and analysing reducing-balance loans and annuities
= / 𝟏𝟎
Revision Lesson 5, Questions 25 – 30
= %
Question 25
Christina invests $350 000 with interest paid at 7.5% per annum compounded monthly.
She receives monthly payments from this investment. What monthly payment will she
receive if she wishes to receive payments for 15 years?

(1 mark)

Question 26
Jacob has $500 000 to set up a perpetuity for his granddaughter Sophie. He invests the
money in bonds that return 3.5% per annum compounded quarterly. How much will Sophie
receive each quarter from this investment?

(1 mark)

Question 27
Lucy wishes to set up a scholarship fund in her name so that each year an amount of $5000
is awarded to a promising cross-country runner at the school she attended. If interest on the
investment average to 4% per annum simple interest, compounded yearly, how much
should she invest?

(1 mark)
Question 28
Tommy invests $4000 in an account earning 8% p.a. interest compounded annually. He
deposits an extra $1200 into the account each year after the initial deposit. The table below
shows the progress of the investment for the first three years.

a) Complete the table showing the value of the investment for the first 3 years, giving all
values to the nearest cent.

Deposit Deposit made Interest earned Principal Value of

number ($) ($) increase ($) investment ($)
n
0 0.00 0.00 0.00 4 000.00
1 1200.00 320.00 1520.00 5 520.00

2 1200.00 441.60

(1 mark)

b) Write a recurrence relation for the value of the investment after n deposits.

(2 marks)

c) Use the recurrence relation to find the value of the investment after 5 years.

(1 mark)
Question 29
Kimberley opens a savings account with an initial investment of $3000 at 6.5% p.a.
compounded monthly. At the end of each month, she makes a deposit of $800. Find

a) The amount of her investment after 5 years

(1 mark)

b) The interest earned

(1 mark)

Question 30
The owners of a restaurant estimate that $40 000 will be needed in 4 years’ time for
renovations. They open an investment account with an initial deposit of $2000 and interest
of 6% p.a. compounded quarterly. How much must be deposited into the account each
quarter in order for them to have enough for the renovations in 4 years’ time?

(1 mark)