Question

James invests £2000 in a bank account with a compound interestrate of 1.3%.Write a calculation thatwould give you the amount he has after 5 years step by step answer

Answer 1

4 percent annual interest compounded quarterly --> 1% in 3 moths.

For the first 3 moths interest was 1% of $10,000, so $100;

For the next 3 moths interest was 1% of $10,000, plus 1% earned on previous interest of $100, so $100+$1=$101;

Total interest for 6 months was $100+$101=$201, hence balance after 6 months was $10,000+ $201=$10,201.

Answer: D.