Two years of 10% growth is ×1.1×1.1 = +21%, not +20%. Treating repeated percentage growth (or interest) as simple multiplication of the rate undershoots — and the simple-interest answer is always waiting in the options.
Linear thinking is the default: twice the time, twice the growth. Compounding's 'growth on growth' has to be invoked deliberately, and under time pressure the shortcut wins.
For repeated growth, multiply factors: (1 + rate) to the power of periods, never rate × periods. Quick check: compound must beat simple for growth (and the gap widens with time) — if your two-year answer is exactly double the one-year figure, you've simple-interested a compound question.
£3,500 at 3% simple interest for 2 years. How much interest is earned?
Simple interest = principal × rate × years — the interest doesn't compound. The correct answer is £210. Traps to avoid: £105 comes from the "one year" error; £3,710 comes from the "total not interest" error; £420 comes from the "doubled" error; £213 comes from the "used compound" error.
This trap appears in 25 of our questions, across: Simple interest · Profit margin · Hidden rate.
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