Question

On 15 November in each of the years 1964 to 1979 inclusive an investor deposited £500 in a special bank savings account. On 15 November 1983 the investor withdrew their savings. Given that over the entire period the bank used an annual interest rate of 7% for its special savings accounts, find the sum withdrawn by the investor.

Answer 1

The sum withdrawn by an investor who deposited £500 annually from 1964 to 1979 in a savings account with an annual interest rate of 7% and withdrew on November 15, 1983, can be calculated using the compound interest formula for each deposit.

Step-by-step explanation:

The student asked about the sum withdrawn by an investor who deposited £500 annually from 1964 to 1979, inclusive, into a special bank savings account with a fixed annual interest rate of 7%, and withdrew it all on November 15, 1983.

To calculate this, we need to treat each £500 deposit as a separate investment that grows according to the formula for compound interest, which is A = P(1 + r)^n, where:

• P is the principal amount (£500)
• r is the annual interest rate (0.07)
• n is the number of years the money is invested
• A is the amount of money accumulated after n years, including interest.

Since the deposits were done annually for 16 years (1964-1979), they will have grown for different numbers of years by 1983. We will calculate the compound interest for each £500 deposit individually and sum them up to get the total amount withdrawn in 1983.