Question

toni invests money into an account which pays a fixed rate of compound interest each year. the total, £v, of her investment after t years is given by the formula v=1350x1.04t. how much money did toni invest? what rate of compound interest is paid each year? which of graphs A,B or C best represents the growth in toni's account?

Answer 1

The correct formula is,

v = 1350 x 1.04^t

toni invests money into an account which pays a fixed rate of compound interest each year. The total value, £v, of her investment after t years is given by the formula,

v = 1350 x 1.04^t

The general formula used to calculate the interest rate is given by,

a = p x (1 + r)^t

Comparing the given equation with standard equation, we get,

a = v        (amount)

p = 1350  (principle amount)

t = t          (time period)

1 + r = 1.04

⇒ 1 + r = 1 + 0.04

∴ r = 0.04    (rate of interest)

Therefore, the rate of compound interest is r = 0.44 × (100 / 100) = 4%

Therefore, the money invested by tony P = Rs. 1350