Question

Sally invests £8000 in a savings account. The account pays 2.8% compound interest per year work out the value of her investment after 4 years give your answer to the nearest penny

Answer 1

Answer: the value of her investment after 4 years is £8934.3

Step-by-step explanation:

The formula for determining compound interest is expressed as

A = P(1+r/n)^nt

Where

A = total amount in the account at the end of t years

r represents the interest rate.

n represents the periodic interval at which it was compounded.

P represents the principal or initial amount invested.

t represents the duration of the investment in years.

From the information given,

P = 8000

r = 2.8% = 2.8/100 = 0.028

n = 1 because it was compounded once in a year.

t = 4 years

Therefore,

A = 8000(1+0.028/1)^1 × 4

A = 8000(1+0.028)^4

A = 8000(1.028)^4

A = £8934.3 to the the nearest penny