Claire invests £200000 in a savings account for 4 years.
This account pays compound interest at a rate of 1.6% per annum
Calculate total interest claire will get after 4 years
Answers
Answer:
£13,110.49
Step-by-step explanation:
The formula for Compound interest is calculated as =
Compound Interest = Total Amount (A) - Principal (P)
Since we have already been given the principal in the question as £200,000
The next step would be to find and calculated the Total amount(A) that would be saved after 4 years using the formula below:
(A) = P( 1 + r/n) ^nt
Where A = Total amount
P = Principal which means the amount you are investing in savings
r = interest rate
n = number of times the interest is compounded( it could be daily, weekly,monthly or annually).
t = number of time periods elapsed.
From the question, for Claire's savings investment, we were given the following values:
P(Principal) = £200 000
r(interest rate) = 1.6% = 0.016
n = for Claire this is annually i.e per year = 1
t = number of time periods elapsed = 4 years
The total amount been saved after 4 years is calculated as:
A = P( 1 + r/n) ^ nt
A = £200,000( 1 + 0.016/1)¹× ⁴
A = £200,000(1.016)⁴
A = £213,110.48991
Approximately, A = £ 213,110.49
The total amount been saved after 4 years = £ 213,110.49
From the question above, we were asked to calculate the total amount of interest Claire would get after 4 years. And we can do that using this formula:
Total Amount = Principal + Compound interest
Therefore, Compound Interest = Total amount - Principal
Where: Total amount = £213,110.49
Principal = £200,000
Compound interest = £213,110.49 - £200,000
Compound interest = £13,110.49
Therefore, the total amount of interest Claire will get at the end of 4 years = £13,110.49
So sorry about the error. The error has been corrected above already. Thank you.
Answer:
Total interest Claire is after 4 years is 1280000£.