Dan invests £11000 into a savings account. The bank gives 3.9% compound interest for the first 3 years and 4.5% thereafter. How much will Da

Question

Dan invests £11000 into a savings account. The bank gives 3.9% compound interest for the first 3 years and 4.5% thereafter. How much will Dan have after 7 years to the nearest pound?

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Reagan 1 month 2021-09-14T02:57:54+00:00 1 Answer 0

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    2021-09-14T02:59:32+00:00

    Answer: £14378

    Step-by-step explanation:

    We would apply the formula for determining compound interest which 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 deposited

    From the information given,

    P = £11000

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

    For the first 3 years,

    r = 3.9% = 3.9/100 = 0.039

    Therefore,

    A = 11000(1+0.039/1)^1 × 3

    A = 11000(1.039)^3

    A = $12338

    The new principal is 12338

    For the next 4 years,

    A = 12338(1.039)^4

    A = 14378

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