Question

Holly invests £500 for 4 years in a bank account. The account pays simple interest at a rate of 1.5% per year. Work out the total amount of interest Holly has got at the end of 4 years.

Answer 1

Given:

Amount invested by Holly = £$500$

Number of years = $4$

Also given that, the bank pays simple interest for the amount invested by Holly.

Rate of interest = $1.5$%

To determine:

The total amount received by Holly from the bank at the end of 4 years.

Formulae to be used:

Firstly, the simple interest paid by the bank to Holly at the end of $4$ years is to be calculated. It is done using the formula:

$I=(PTR)/100$......(1)

Where,

$I$= Simple interest given by the bank at the end of $4$ years.

$P$= Principal amount invested in the bank

$T$= Time (in years)

$R$= Rate of interest paid by the bank

Later, the final amount received by Holly from the bank is to be calculated. The final amount is calculated using the formula:

$A=P+I$.......(2)

Where,

$A$= Final amount received by Holly

Solution:

Calculation of Simple interest:

As per the given data, the simple interest is calculated using the equation (1).

$I=(PTR)/100\\I=(500*4*1.5)/100\\I=3000/100\\I=30$

∴ The simple interest paid by the bank at the end of four years is £$30$.

Calculation of Final amount:

The final amount received by Holly is calculated using the equation (2), in the following way:

$A=P+I\\A=500+30\\A=530$

∴ The final amount received is £$530$.

Final Answer:

The final amount received by Holly at the end of $4$ years from the bank is £$530$.