Question

Northern Bank has two types of account. Both accounts pay compound interest. Cash savings account Interest 2.5% per annum Shares account Interest 3.5% per annum Ali invests £2000 in the cash savings account. Ben invests £1600 in the shares account. (a) Work out who will get the most interest by the end of 3 years. You must show all your working.

Answer 1

Answer: Ben will have the most interest.

Explanation:

Ali after 3 years.

To use compound interest, the formula is:

= Investment * ( 1 + rate) ^ no. of periods

= 2,000 * ( 1 + 2.5%)³

= £‭2,153.78

Interest = Amount after 3 years - investment

= 2,153.78 - 2,000

= £153.78

Ben after 3 years.

= 1,600 * (1 + 3.5%)³

= £1,773.95

Interest = 1,773.93 - 1,600

= £173.93