Unit 3: Growth and Depreciation
Exercise 3.1 and Exercise 3.2 — WordPress-ready solutions reconstructed from the supplied 39-page handwritten notes.
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Important Formulae
Exercise 3.1 – Growth
Basic Growth Problems
1. Stock price increased by 10% in one year
P = Rs 1,500, R = 10%, T = 1 year
PT = 1500(1 + 10/100)1
= 1500 × 1.1
∴ Current price = Rs 1,650
2(a). Population growth problem
P = 5,18,452, R = 4.5%, T = 3 years
PT = 5,18,452(1.045)3
The handwritten solution gives a future population of approximately 5,91,5xx.
2(b). Rent increases by 5% every year
P = Rs 10,000, R = 5%, T = 3 years
PT = 10,000(1.05)3
∴ Rent after 3 years = Rs 11,576.25
2(c). Bacteria increase by 10% per hour
Initial number = 4 × 1011, R = 10%, T = 2 hours
PT = 4 × 1011(1.1)2
= 4 × 1011 × 1.21
∴ Number after 2 hours = 4.84 × 1011
3(a). Rural-municipality population
P = 28,500, R = 2%, T = 5 years
PT = 28,500(1.02)5
∴ Future population ≈ 31,466
Increase ≈ 31,466 − 28,500 = 2,966
3(b). School monthly fee increased by 10% every year
Fee 3 years ago = Rs 6,500
PT = 6,500(1.10)3
= Rs 8,651.50
Increase = 8,651.50 − 6,500
∴ Increase = Rs 2,151.50
3(c). Land price grows by 10% per year
Present price = Rs 6,00,000, R = 10%, T = 2 years
PT = 6,00,000(1.1)2
= Rs 7,26,000
Increase = 7,26,000 − 6,00,000
∴ Increase = Rs 1,26,000
Finding Growth Rate
(a) P = 20,000, PT = 21,682, T = 2 years
21,682 = 20,000(1 + R/100)2
21,682 / 20,000 = (1 + R/100)2
The source concludes the annual growth rate is approximately 4%.
(b) P = Rs 4,00,000, PT = Rs 4,41,000, T = 2 years
4,41,000 = 4,00,000(1 + R/100)2
1.1025 = (1 + R/100)2
1.05 = 1 + R/100
∴ R = 5%
(c) P = 125, PT = 216, T = 3 years
216 = 125(1 + R/100)3
216/125 = (1 + R/100)3
1.728 = (1 + R/100)3
1.2 = 1 + R/100
∴ R = 20%
Finding Time
(a) P = 10,000, PT = 13,310, R = 10%
13,310 = 10,000(1.1)T
1.331 = (1.1)T
(1.1)3 = (1.1)T
∴ T = 3 years
(b) Growth at 4% p.a.
The source simplifies the amount/principal ratio to:
1.0816 = (1.04)T
(1.04)2 = (1.04)T
∴ T = 2 years
Finding Present Population / Present Value
(a) Future total = 2,55,55,200, R = 10%, T = 3 years
2,55,55,200 = P(1.1)3
P = 2,55,55,200 / 1.331
∴ P = 1,92,00,000
(b) Future total = 42,59,200, R = 10%, T = 3 years
42,59,200 = P(1.1)3
P = 42,59,200 / 1.331
∴ P = Rs 32,00,000
Growth at Different Rates in Different Years
(a) P = Rs 1,00,000; rates 3%, 4% and 5%
PT = 1,00,000(1.03)(1.04)(1.05)
= 1,00,000 × 1.12476
∴ PT = Rs 1,12,476
(b) Population = 1,50,000; rates 2%, 4% and 5%
PT = 1,50,000(1.02)(1.04)(1.05)
= 1,50,000 × 1.11384
∴ PT = 1,67,076
Direct growth examples
P = 1,000, T = 3 years, R = 20%
PT = 1,000(1.2)3 = 1,728
P = 200, T = 2 years, R = 20%
PT = 200(1.2)2 = 288
Growth with Migration / Addition / Deduction
Problem: final population/value 30,000 after 2 years, 10% growth and an added 5,800
30,000 = P(1.1)2 + 5,800
30,000 − 5,800 = 1.21P
24,200 = 1.21P
∴ P = 20,000
Problem: PT = 120, R = 5%, T = 2 years
120 = P(1.05)2
P = 120 / 1.1025
∴ P ≈ 108.84
Problem: P = 31,250, R = 6%, with an adjustment of 625
After the first year, the source writes:
P1 = 31,250(1.06) − 625 = 32,500
For the next year:
P2 = 32,500(1.06)
∴ P2 = 34,450
Problem: population 3,75,000, growth 2%, migration 1,980 and deaths 2,750
After 2 years:
3,75,000(1.02)2 + 1,980 − 2,750
= 3,88,880
After one more year at 2%:
3,88,880(1.02) = 3,96,657.6
Rounded population ≈ 3,96,658
Population growth from 2075 B.S. to 2079 B.S.
Population in 2075 = 5,00,000
Population after 3 years = 6,65,500
6,65,500 = 5,00,000(1 + R/100)3
1.331 = (1 + R/100)3
∴ R = 10%
Population after another 2 years:
6,65,500(1.1)2
∴ Population = 8,05,255
Exercise 3.2 – Depreciation
Basic Depreciation Problems
1. Watch costing Rs 5,000, depreciation 7% for 1 year
VT = 5,000(1 − 7/100)
= 5,000 × 0.93
= Rs 4,650
Depreciated value = 5,000 − 4,650 = Rs 350
2(a). Motorcycle sold for Rs 57,000 after 1 year at 5% depreciation
57,000 = V0(0.95)
V0 = 57,000 / 0.95
∴ Purchase price = Rs 60,000
3(a). Cupboard costing Rs 16,800, depreciated by 15% for 2 years
VT = 16,800(0.85)2
= Rs 12,138
3(b). Motorcycle price Rs 2,50,000, depreciation 4% for 3 years
VT = 2,50,000(0.96)3
∴ VT = Rs 2,21,184
4(a). V0 = Rs 30,000, R = 30%, T = 2 years
VT = 30,000(0.70)2
= Rs 14,700
Depreciated amount = 30,000 − 14,700
∴ Rs 15,300
4(b). V0 = Rs 96,000, R = 15%, T = 3 years
VT = 96,000(0.85)3
= Rs 58,956
Depreciated amount = 96,000 − 58,956
∴ Rs 37,044
Finding Depreciation Rate
(a) V0 = Rs 3,12,500 and VT = Rs 1,60,000 after 3 years
1,60,000 = 3,12,500(1 − R/100)3
1,60,000 / 3,12,500 = (1 − R/100)3
0.512 = (1 − R/100)3
(0.8)3 = (1 − R/100)3
0.8 = 1 − R/100
∴ R = 20%
(b) V0 = Rs 5,000 and VT = Rs 625 after 3 years
625 = 5,000(1 − R/100)3
0.125 = (1 − R/100)3
(0.5)3 = (1 − R/100)3
0.5 = 1 − R/100
∴ R = 50%
Finding Time and Earlier Value
(a) V0 = Rs 4,00,000, VT = Rs 1,96,000, R = 30%
1,96,000 = 4,00,000(0.70)T
0.49 = (0.70)T
(0.70)2 = (0.70)T
∴ T = 2 years
(b) V0 = Rs 8,00,000, VT = Rs 5,83,200, R = 10%
5,83,200 = 8,00,000(0.9)T
0.729 = (0.9)T
(0.9)3 = (0.9)T
∴ T = 3 years
Earlier value: VT = Rs 125, R = 5%, T = 2 years
125 = V0(0.95)2
V0 = 125 / 0.9025
∴ V0 ≈ Rs 138.50
Present value Rs 2,80,000 depreciated by 5% for 3 years
VT = 2,80,000(0.95)3
∴ VT = Rs 2,40,065
Different Depreciation Rates in Different Years
(a) V0 = Rs 5,00,000; rates 15%, 10% and 5%
VT = 5,00,000(0.85)(0.90)(0.95)
∴ VT = Rs 3,63,375
(b) Two different annual depreciation rates
The source uses:
Depreciation with Earnings – Profit and Loss
9. Vehicle value Rs 48,00,000, earnings Rs 6,80,000, depreciation 10% for 2 years
VT = 48,00,000(0.9)2
= Rs 38,88,000
Depreciated amount = 48,00,000 − 38,88,000
= Rs 9,12,000
Loss = 9,12,000 − 6,80,000
∴ Loss = Rs 2,32,000
10. Asset value Rs 16,00,000, earnings Rs 5,10,000, depreciation 5% for 3 years
VT = 16,00,000(0.95)3
= Rs 13,71,800
Depreciated amount = 16,00,000 − 13,71,800
= Rs 2,28,200
Profit = 5,10,000 − 2,28,200
∴ Profit = Rs 2,81,800
Finding Depreciation Rate and Original Value from Two Future Values
13. Value after 2 years = Rs 10,240 and after 3 years = Rs 8,192
For 2 years:
V0(1 − R/100)2 = 10,240 … (i)
For 3 years:
V0(1 − R/100)3 = 8,192 … (ii)
Dividing (ii) by (i):
1 − R/100 = 8,192 / 10,240 = 0.8
R/100 = 0.2
∴ R = 20%
Using equation (i):
V0(0.8)2 = 10,240
0.64V0 = 10,240
∴ V0 = Rs 16,000
14. Value after 2 years = Rs 5,41,500 and after 3 years = Rs 5,14,425
For 2 years:
V0(1 − R/100)2 = 5,41,500 … (i)
For 3 years:
V0(1 − R/100)3 = 5,14,425 … (ii)
Dividing (ii) by (i):
1 − R/100 = 5,14,425 / 5,41,500 = 0.95
R/100 = 0.05
∴ R = 5%
Putting R = 5% in equation (i):
V0(0.95)2 = 5,41,500
0.9025V0 = 5,41,500
∴ V0 = Rs 6,00,000
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