Question

Ginny opens a savings account and desides to pay £200 into the account at the start of each month. At the end of each month, interest of 0.5% is paid into the account.Find the total interest paid into the account over the first 12 months.

Answer 1

The monthly payment is given to be £200. This means that the total amount paid in 12 months will be:

`12*200=\pounds2400`

The amount in the account after 12 months can be calculated using the formula:

`A=(Pr(r^n-1))/(r-1)`

From the question, we have the following parameters:

`\begin{gathered} P=200 \\ r=1.005 \\ n=12 \end{gathered}`

Therefore, the amount will be:

`\begin{gathered} A=(200*1.005(1.005^(12)-1))/(0.005) \\ A=2479.45 \end{gathered}`

Therefore, the interest will be calculated to be:

`\begin{gathered} I=2479.45-2400 \\ I=79.45 \end{gathered}`

The interest paid is £79.45.