Question

harry invests £6000 in a savings account. the account pays 3.4% compound interest per year. work out the value of his investment per year. work out the value of his investment after 3 years. give your answer to the nearst penny.

Answer 1

Invested amount (P0 = £6000.

Rate of interest (r) = 3.4% = 0.034.

We know compound interest formula

A = P(1+r)^t

We need work out the value of his investment per year.

So, we need to plug t=1 and plugging values of P and r in the formula above, we get

A = 6000(1+0.034)^1

A = 6000(1.034)

A = 6204.

Therefore, the value of his investment per year is £ 6204.

Now, we need to work out the value of his investment after 3 years.

So, we need to plug t=3.

A = 6000(1+0.034)^3

A = 6000(1.034)^3

1.034^3=1.105507304

A = 6000 × 1.105507304

A = 6633.04

Therefore, the value of his investment after 3 year is  £ 6633.04.