Question

Brian invests £1900 into a savings account. The bank gives 3.5% compound interest for the first 2 years and 4.9% thereafter. How much will Brian have after 6 years to the nearest pound?

Answer 1

Answer:

$\£2,465$  

Step-by-step explanation:

we know that    

The compound interest formula is equal to  

$A=P(1+\frac{r}{n})^{nt}$  

where  

A is the Final Investment Value  

P is the Principal amount of money to be invested  

r is the rate of interest  in decimal

t is Number of Time Periods  

n is the number of times interest is compounded per year

step 1

Find the final investment for the first two years

we have  

$t=2\ years\\ P=\£1,900\\ r=0.035\\n=1$  

substitute in the formula above  

$A=\£1,900(1+\frac{0.035}{1})^{1*2}$  

$A=\£1,900(1.035)^{2}$

$A=\£2,035.33$  

step 2

Find the final investment for the next 4 years

we have  

$t=4\ years\\ P=\£2,035.33\\ r=0.049\\n=1$  

substitute in the formula above  

$A=\£2,035.33(1+\frac{0.049}{1})^{1*4}$  

$A=\£2,035.33(1.049)^{4}$  

$A=\£2,464.55$  

Round to the nearest pound

$\£2,464.55=\£2,465$