Question

Compound interest4. The price of a flat was £90 000. At the end of each year the price has decreased by 5%.(i) Find the price of the flat after 1 year.(ii) Find the price of the flat after 2 years.

Answer 1

Given

price of a flat was £90 000

decreased by 5%

Find

(i) Find the price of the flat after 1 year.

(ii) Find the price of the flat after 2 years.

Explanation

Here we use the formula

$A=P(1-\frac{r}{100})^t$

i)

$\begin{gathered} A=90,000(1-\frac{5}{100})^1 \\ \\ A=90,000(0.95) \\ A=85,500 \end{gathered}$

ii) after 2 years ,

$\begin{gathered} A=90,000(1-\frac{5}{100})^2 \\ \\ A=90,000(0.95)^2 \\ A=81,225 \end{gathered}$

Final Answer

hence ,

i) the price of the flat after 1 year will be £85,500.

ii) the price of the flat after 2 year will be £81,225