Question

Simple Interest question

Answer 1

a) Pr⁵ = £1480.50

Pr⁶ = £1524.50

ln P + 5 ln r = ln 1480.50

ln P + 6 ln r = ln 1524.60

6 ln P + 30 ln r = 6 ln 1480.50

5 ln P + 30 ln r = 5 ln 1524.60

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ln P = 7.1534

P = e^7.1534 = £1278.41

b) r = £1524.50/£1480.50 = 1.0297

So the annual interest rate is about

3.0%.