Southern Bank has two types of account.
Both accounts pay compound interest.
Everyday saver account
Interest
2.4% per annum
1234 account
Interest
3.4% per annum
Sue invests £2300 in the saver account.
Bill invests £1800 in the 1234 account.
a) Work out how much interest Sue and Bill each get after 3 years.
Sue:
Bill:
b) If the interest for the 1234 account changes to 4% in the 3rd year,
who will get the most interest after 3 years, Sue or Bill?
Total
Answers
Given : two types of account. ( compound interest annually )
Everyday saver account Interest 2.4% per annum
1234 account Interest 3.4% per annum
Sue invests £2300 in the saver account.
Bill invests £1800 in the 1234 account
To Find : how much interest Sue and Bill each get after 3 years.
Solution:
A = P ( 1 + R/100)ⁿ
Interest = A - P
Sue invests £2300 in the saver account.
P = 2300
r = 2.4
n = 3
A = 2300 ( 1 + 2.4/100)³ = 2,469.6
interest = 2,469.6 - 2300 = 169.6
Bill invests £1800 in the 1234 account
P = 1800
r = 3.4
n = 3
A = 1800 ( 1 + 3.4/100)³ = 1,989.9
interest = 1,989.9 - 1800 = 189.9
Bill gets more interest than sue
interest for the 1234 account changes to 4% in the 3rd year,
A = 1800 ( 1 + 3.4/100)²(1 + 4/100) = 2,001.46
Interest = 201.46
Bill will get more interest
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