Question

Colin invests £1500 into a savings account the bank gives 4% compound interest for the first 3 years and 5% thereafter how much will colin have after 4 years to the nearest pound

Answer 1

for the first three years,

P = £1500     R = 4%     t=3

A = P(1+R)^t

A = 1500 (104/100)³

A = 1500 × 26 × 26 × 26/25×25×25

 = £ 1687.3  

For the next 1 year,

P = £1687.3  R=5%   t = 1

A = P(1+R)^t

A = 1687.3 (105/100)= 1687.3×21/20 = 1771.6

Rounding to the nearest pound : £1772