Question

Freddie invests £6600 in an account that pays 3 % compound interest per annum for the two years, then 1 % . Work out how much money Freddie will have in his account in 8 years.

Answer 1

Using compound interest, it is found that Freddie will have £7433 in his account in 8 years.

What is compound interest?

The amount of money earned, in compound interest, after t years, is given by:

$A(t) = P\left(1 + \frac{r}{n}\right)^{nt}$

In which:

• A(t) is the amount of money after t years.

• P is the principal(the initial sum of money).

• r is the interest rate(as a decimal value).

• n is the number of times that interest is compounded per year.

For the first two years, the parameters are given as follows:

P = 6600, r = 0.03, n = 1, t = 2.

Hence the amount is:

$A(t) = P\left(1 + \frac{r}{n}\right)^{nt}$

$A(2) = 6600\left(1 + 0.03)^{2}$

A(2) = 7002.

For the final 6 years, the parameters are:

P = 7002, r = 0.01, n = 1, t = 6.

Hence the amount after 8 years is:

$A(t) = P\left(1 + \frac{r}{n}\right)^{nt}$

$A(6) = 7002\left(1 + 0.01)^{6}$

A(6) = 7433.

Freddie will have £7433 in his account in 8 years.

More can be learned about compound interest at https://brainly.com/question/25781328

#SPJ1