Question

Paul invests £500 at a rate of 1.5% per year compound interest.

Find the value of the investment after 3 years.
Give your answer correct to the nearest penny.

Answer 1

Tthe value of Paul's investment after 3 years would be equal to 52,285 penny.

How to calculate compound interest?

Mathematically, compound interest is calculated by using this formula:

$A=P(1+r )^{t}$

Where:

• A is the future value.

• P is the principal.

• R is the interest rate.

• T is the time measured in years.

Given the following data:

Principal = £500.

Time = 3 years

Interest rate = 1.5% = 0.015.

Substituting the given parameters into the formula, we have;

A = 500(1 + 0.015)³

A = 500(1.015)³

A = 500 × 1.0457

A = £522.85.

Conversion:

100 penny = 1 pounds.

X penny = 522.85 pounds.

Cross-multiplying, we have:

X = 522.85 × 100

X = 52,285 penny.

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