Question

6 An account pays

4% compound interest per year.
Eric invests £1500 into the account for 2 years.
How much interest will he earn?
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Answer 1

Answer: £122.4

Explanation:

Given

The rate of interest is 4%

The principal invested is £1500

the time period is 2 years

Compound interest is given by

`C.I.=P(1+r\%)^t-P`

put values

`C.I.=1500(1+0.04)^2-1500\\C.I.=1500[1.04^2-1]\\C.I.=1500[1.0816-1]\\C.I.=1500* 0.0816\\C.I.=122.4`

Therefore, interest earned is £122.4