Question

Jarvis invests £200 000 in a savings account for 5 years. The account pays compound interest at a rate of 2.5% per annum. Calculate the total amount of interest Jarvis will get at the end of 5 years. ​

Answer 1

£250

Explanation:

To solve this problem, we need to use the compound interest formula: P (1 + r/n)nt. Here, P is the principal amount, r is the interest rate, n is the number of times per year interest is paid, and t is the number of years. In this case, P = £200 000, r = 0.025 (2.5%), n = 1, and t = 5. Therefore, the total interest at the end of 5 years is: £200 000 (1 + 0.025)5. This gives us: £200 000 (1.025)5 = £250