Question

Feruzi invests 80 000 Kenyan shillings (KES)

He invests the money for 3 years at x% compound interest each year.
At the end of 3 years, the total interest he receives is 6151.25 KES
Work out the value of x

Answer 1

The value of x in this compound interest problem is 7.6%.

Step-by-step explanation:

To calculate the compound interest, we can use the formula A = P(1+r/n)^(nt), where A is the final amount, P is the principal amount, r is the annual interest rate (expressed as a decimal), n is the number of times the interest is compounded per year, and t is the number of years.

In this case, Feruzi invested 80,000 KES for 3 years. Let's assume the annual interest rate is x%.

The formula becomes: 80,000 = 80,000(1+x/100/1)^(1*3)

Simplifying the equation, we have 1+x/100 = 1.076 (using the given example).

Solving for x, we get x = 7.6%