Question

Colin invests £2350 into a savings account. The bank gives 4.2% compound interest for the first 4 years and 4.9% thereafter. How much will Colin have after 10 years to the nearest pound?

Answer 1

3691 pounds

Explanation:

Given: Colin invests £2350 into a savings account. The bank gives 4.2% compound interest for the first 4 years and 4.9% thereafter

To find: Amount that Colin will have after 10 years

Solution:

Let P, r, n denotes principal, rate of interest and time period

For the first 4 years:

`P=\£\,2350\,,\,r=4.2\%\,,\,n=4`

Total amount after 4 years =
`P\left ( 1+(r)/(100) \right )^n=2350\left ( 1+(4.2)/(100) \right )^4=\£ 2770.38`

For the next 6 years:

`P=\£\,2770.38\,,\,r=4.9\%\,,\,n=6`

Total amount after 6 years =
`P\left ( 1+(r)/(100) \right )^n=2770.38\left ( 1+(4.9)/(100) \right )^6=3691.41\approx \£\,3691`