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

Answer:

3691 pounds

Step-by-step 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 = $P\left ( 1+\frac{r}{100} \right )^n=2350\left ( 1+\frac{4.2}{100} \right )^4=\£ 2770.38$

For the next 6 years:

$P=\£\,2770.38\,,\,r=4.9\%\,,\,n=6$

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