Part 1

a) Explain the meaning Compound Interest

Compound interest is the addition of interest to the principal sum of a loan or

deposit or in other words , interest on interest. It is the result of reinvesting
interest, rather than paying it out, so that interest in the next period is then
earned on the principal sum plus previously accumulated interest. Compound
interest is standard in finance and economics.

Compound interest is contrasted with simple interest, where previously

accumulated interest is not added to the principal amount of the current period,
so there is no compounding. The simple annual interest rate is the interest
amount per period, multiplied by the number of periods per year. The simple
annual interest rate also known as the nominal interest rate (not to be confused
with the interest rate not adjusted for inflation, which goes by the same name).
Compound interest A = P (1 + r/n) (nt)

1
b) How can Mathematics be used to calculate to Compound Interest

With compound interest, you work out the interest for the first period, add it to
the total, and then calculate the interest for the next period, and so on……, like
this:
$100 $1100 $1210 $1331
X10% X10% X10% etc…
$100 $110 $121

It grows faster and faster like this

Column1
2500

2000

1500

1000

500

0
0 1 2 3 4 5 6 7

Year Loan at start interest Loan at end

0 (now) $1 000.00 ($1000.00X10%=)$100.00 $1100.00
1 $1 100.00 ($1100.00X10%=)$110.00 $1210.00
2 $1 210.00 ($1210.00X10%=)$121.00 $1331.00
3 $1 331.00 ($1331.00X10%=)$133.10 $1464.10
4 $1 464.00 ($1464.10X10%=)$146.10 $1610.51
5 $1 610.51

2
Those calculation are done one step at a time:
Calculate the interest ( = “loan at start” X interest rate )
Add interest to the “Loan at start“ of the next year
The loan at end” year is the “ Loan at start” of the next year

Compound interest formula :

A = P (1 + r/n) (nt)

A = the future value of the investment/loan, including interest

P = the principal investment amount (the initial deposit or loan amount)
r = the annual interest rate (decimal)
n = the number of times that interest is compounded per unit t
t = the time the money is invested or borrowed for

3
Compound interest is calculated based on the principal sum, interest rate-
annual percentage rate (APR), and the time involved using these formula.
When the interest is compounded annually / per annum / once a year:

A= P(1+r)t
A= the amount of money accumulated after n years, including interest.
P= the principal sum ( the initial amount you deposit or borrow)
r =the annual rate of interest (percentage)
t = The number of years the amount is deposited or borrowed for.

Applying the formula for the given situation – if you borrow for 5 years the
formula will look like:

A=P(1+r)5

This formula applies to both money invested and money borrowed.

Another formula that can be applied is :

𝑟
A= P(1+ )nt
𝑛

A= the amount of money accumulated after n years, including interest.

P= the principal sum ( the initial amount you deposit or borrow)
r =the annual rate of interest (percentage)
t = The number of years the amount is deposited or borrowed for
n = The number of compoundings in any one year

4
This formula can be applied when the compounding of interest in a year is more
than once. For instance, if the interest is compounded yearly, then n=1 ; if semi-
annually, then n=2; quarterly, then n = 4: monthly, then n = 12; weekly, then n
= 52; daily, then n = 365; and so forth, regardless of the number of years inv

5
Part 2
a) Based on the situation given, if you did not withdraw any savings for 25
years, construct a table to show the total amount of saving 25 years. Give your
answer to the nearest RM

Year Amount Saved (RM) Cumulative Amount (RM)

0(Base) 10,000 10,000
1 11,000 21,000
2 12,100 33,100
3 13,310 46,410
4 14,461 61,051
5 16,105 77,156
6 17,716 94,872
7 19,487 114,359
8 21,436 135,795
9 23,579 159,374
10 25,937 185,312
11 28,531 213,843
12 31,384 245,227
13 34,523 279,750
14 37,975 317,725
15 41,772 359,497
16 45,950 405,447
17 50,545 455,992
18 55,599 511,591
19 61,159 572,750
20 67,275 640,025
21 74,002 714,027
22 81,403 795,430
23 89,543 884,973
24 98,497 983,471
25 108,347 1,091,818

6
b) Show the total sum, J that you should receive can be calculated using the
formula

𝒓
J = P(1+ )n
𝟏𝟎𝟎

P = starting principal
r = rate of compound interest
n = number of years investment

10000(1−1.125 )
J=
1−1.1

= RM 983470.59

7
C. Will your dream of saving at least RM 1 million after 25 years be realised?
Give a reason for your answer

Using the formula, we can also find the total sum,J that would be received
after a period of time n years
𝑟
J=P(1+ )n
100

P = starting principal
r = Rate of compound interest
n = number of years of investment

10 1
The amount saved in the first year is J1 = 10000(1+ ) =11000
100
10 2
The amount saved in the second year is J2 =10000(1+ ) =12100
100
10 3
The amount saved in third year is J3 =10000(1+ ) =13310 and so forth
100

The amount saved in the 25th year is J25 =10000(1.1)25 =108347

Hence, the total amount saved after 25 years is

=J0+J1+J3+…….+J25

= 10000+10000(1.1)+10000(1.1)2+…….+10000(1.1)25

We can use the formula for the sum of the first n terms of an arithmetic
progression as below
1000(1.126 −1)
=
1.1−1

=RM1,091,818

Therefore, we can conclude that the dream of saving at least RM 1 million after
25 years can be realised as RM 1,091,818 is more than RM 1,000,000.

8
 Part 3

a) Based on table 1, calculate the composite index of the market prices in the
year 2010 based on the year 2005

District Price Index Number of Weightage Iw

houses

Gombak 385000 215 10 1305.1

x100=130.51
295000

320000
Hulu Langat x100=123.08 325 15 186.2
260000

230000
Klang x100=124.32 298 14 1740.48
260000

Petaling 550000 709 33 5041.74

x100=152.78
360000

Sepang 205000 43 2 282.76

x100=141.38
145000

1305.1+1846.2+1740.48+5041.74+282.76
Therefore, the composite index Ī=
10+15+14+33+2
10216.28
=
74

=138.06

9
b) Given the composite index for the year 2018 based one the year 2010
remain unchanged. Calculate the market price of houses in the Klang Valley in
2018 if the corresponding market price in the year 2005 is RM292157

2005 2010 2018

Ī=138.06 Ī=138.06

𝑃2010
𝑥100 = 138.06
292157

P2010=RM403351.95

𝑃2018
𝑥100 = 138.06
403351.95

P2018=RM556867.70

C) The market price of houses is expected to increase by 12% from the year
2018 to the year 2025. Find the composite price index in the year 2025 based
on the year 2005.

Ī=138.06X1.12 = 154.63

10
Part 4
a) Based on diagram 2, copy stage 3 and then construct stage 4 of the outer
squares of Phytagoras’ Tree
Stage 3

11
Stage 4

12
 b) Complete table 2

Stage 1 2 3 4 5 … 10 … n
Number of outer squares 2 4 8 16 32 1024 2n

c) Hence, derive the general formula for the number of outer squares of the
Pythagoras’ Tree in stage n

The sequence presented by the number of outer space of the Pythagoras’ Tree
is a Geometric Progression because
𝑇2 4 𝑇3 8
= =2, = =2
𝑇1 2 𝑇2 4

𝑇2 𝑇3
=
𝑇1 𝑇2

Hence using the Geometric Progression formula,

Tn= arn-1 where a is the first term and r is the ratio between two consecutive
terms.
𝑇2 4
r= = =2
𝑇1 2

Tn= 2(2)n-1
= 2(2n)(2-1)
1
= 2(2n)( )
2
n
=2

13
 Further Exploration

Task 1

Based on part 4 ( table 2), determine the value of

Task 2

Measure the distance from the tip of your nose to the bottom of your chin and
the centre of your lips (with your mouth closed) to the bottom of your chin.
Take 6 different readings from your friends and complete table 3

Distance from tip of nose to bottom of 8.5 10.0 8.7 7.8 7.3 7.6
chin(a)

Distance from centre of lips to bottom of 4.8 6.0 5.4 4.5 4.1 4.9
chin(b)

Value a:b 1.771 1.667 1.611 1.733 1.780 1.551

Table 3

14
a) What is the ratio obtained ?

The golden ratio ϕ is a special irrational number that is approximately equal to

1.618. It appears many times in geometry, art, architecture and other fields. The
Golden ratio is a special number found by dividing a line into two parts so that
the longer part divided by the smaller part is also equal to the whole length
divided by the longer part. In the equation form, it looks like this :
𝑎 𝑎+𝑏
= = 1.6180339887498948420….
𝑏 𝑎

Historically, the number can be seen in the architecture of any ancient creations,
like the Great pyramids and the Parthenon. In the Great Pyramids of Giza, the
length of each side of the base is 756 feet with a height 481 feet. The ratio of
the base to the height is roughly 1.577, which is close to the Golden ratio.
Around 1200, the mathematician Leonardo Fibonacci discovered the distinctive
properties of the Fibonacci numbers is very close to the Golden ratio. As the
numbers increase, the ratio of 144 to 233 is 1.618, which eventually converges
to 1.618.

The Golden Rectangle is also closely related to the Golden ratio as its proportion
of its dimension is approximately to the value 1.618. this is known as one of the
most visually satisfying of all geometric forms- hence, the appearance of the
Golden ratio in art. The Golden rectangle is also related to the Golden spiral,
which is created by making adjacent squares of Fibonacci dimensions. In the
beauty industry, studies have shown that when test subject view random faces
the one they deem most attractive are those with solids parallels to the Golden
ratio. Faces judged as the most attractive depict Golden ratio propotions
between the width of the face and the width of the eyes,nose and eyebrows. In
toto, the Golden ratio is more than obscure term found in Mathematics and
Physics. It also revolves around us in our daily lives

15
b) What are your observations based on the measurements obtained ?

The values of the distance from tip of nose to bottom of chin(a) and the distance
from the centre of lips to bottom of chin (b) that are taken above are
independent and random. Both a and b are related by taking the ratio a:b which
will gives us values that are approximated to the Golden ratio that has an
approximate value 1.618 with an uncertainty of ± 0.1

c) Are your group’s facial assessments nearing the divine ratio according to the
ratio of the gross readings taken

8.5+10.0+8.7+7.8+7.3+7.6
Gross value of a = = 8.317
6

4.8+6.0+5.4+4.5+4.1+4.9
Gross value of b = = 4.950
6

8.317
Ratio of the Gross readings taken = = 1.680
4.950

The difference between ratio of the Gross readings taken and the divine ratio is
1.680-1.618 = 0.062 which is negligible. Therefore, the ratio of the gross readings
taken is nearing the divine ratio ( Golden ratio)

16
Reflection

While I was conducting this project, I have learnt how to appreciate and enjoy
the beauty of mathematics. I have learnt how to apply my Index Number skills,
calculating compound interest skills, identifying progression skills and tabulating
data skills more efficaciously. I also learnt that the skills mentioned are very
crucial in our life; it can help us solve our daily-life problems that relates to
finance.
The moral values that I have put into practice is compassion and dedication in
conducting this project. I have poured my heart, mind and soul into finishing this
project with the best result. I realised this subject is compulsory for me. Without
it, I could not fulfil my abjured hopes and dreams. These are benefits of the
project.

17
18