Question

Southern Bank has two types of account.Both accounts pay compound interest.Everyday saver accountInterest2.4% per annum1234 accountInterest3.4% per annumSue 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​

Answer 1

Given :   Southern Bank has two types of account.Both accounts pay compound interest.Everyday saver accountInterest2.4% per annum1234 accountInterest3.4% per annum

To find : Work out how much interest Sue and Bill each get after 3 years

Solution:

Sue

P = 2300

R = 2.4

n = 3  

A = P(1 + R/100)ⁿ

A = 2300(1 + 2.4/100)³  = 2469.6

Interest = 2469.6 - 2300  = 169.6

Sue interest = 169.6

Bill

P = 1800

R = 3.4

n = 3  

A = P(1 + R/100)ⁿ

A = 1800(1 + 3.4/100)³  = 1989.9

Interest =1989.9 - 1800  = 189.9

Bill ineterest = 189.9

189.9  > 169.6

Bill interest is already more than  Sue interest

if 3.4 % changes to 4 % in 3rd year then interest will increase more

Hence Bill will get more interest after 3 years

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