Question

What is the total percentage increase in financial value of the bond over the 5 year period? tariq has £25,000 invested in a 5 year savings bond, which has an annual fixed interest rate of 5% for the 5 year term. interest earnings are reinvested into the bond at the end of each calendar year.

Answer 1

The total percentage increase in financial value of the bond over the 5 year period is 22.56%.

Step-by-step explanation:

In order to calculate the total percentage increase in financial value of the bond over the 5 year period, we first need to calculate the total amount at the end of the 5 years. The bond has an annual fixed interest rate of 5%, so each year the value of the bond will increase by 5%.

To calculate the total amount at the end of 5 years, we can use the formula: Final Amount = Principal Amount * (1 + Interest Rate)^Number of Years.

Plugging in the values: Final Amount = £25,000 * (1 + 0.05)^5 = £30,639.45.

To calculate the total percentage increase, we can use the formula: Percentage Increase = (Final Amount - Principal Amount) / Principal Amount * 100.

Plugging in the values: Percentage Increase = (£30,639.45 - £25,000) / £25,000 * 100 = 22.56%.