Answer:
a) Sue's interest: £169.61; Bill's interest: £189.91
b) Bill will earn more
Step-by-step explanation:
The future value formula is useful for this. The amount of interest is the future value of the account, less the principal invested.
FV = P(1 +r/n)^(nt)
Here, interest is assumed to be compounded annually, so n = 1.
I = FV -P = P((1 +r)^t -1)
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a) Sue's interest is ...
I = 2300(1.024^3 -1) = 169.61
Bill's interest is ...
I = 1800(1.034^3 -1) = 189.91
Sue earned £169.61 on her account; Bill earned £189.91 on his.
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b) Bill already earns more interest. If his interest rate goes higher, he will still earn more interest. Bill will get the most interest after 3 years.
