1. ## compound interest

Compound interest is interest paid on an amount and on the interest already received on that amount. You can solve compound interest questions using the formula :

A = P ( 1 + R divided by 100 ) to the power of n

where P is the amount invested initially
R is the rate of interest (percentage per year)
n is the number of years invested
A is the amount in the account at the end of ten years

A building society pays compound interest at a fixed rate of 3.5% per annum. £2000 is invested initially in an account.

What will be the value at the end of 5 years?
After how many whole years will the value of the account first reach £3000?

So is the solution: 2000 (1 + 3.5 divided by 100 ) power of 5 = £2375.37

And 12 years

2. ## Re: compound interest

£2375.37 is correct.
After 12 whole years value will be £3022.14

3. ## Re: compound interest

Originally Posted by mathsgirl123431
A = P ( 1 + R divided by 100 ) to the power of n
where P is the amount invested initially
R is the rate of interest (percentage per year)
n is the number of years invested
A is the amount in the account at the end of ten years : .....end of n years !
In the standard formula, r / 100 is shown as i :
A = P(1 + i)^n

Isolating n: n = LOG(A/P) / LOG(1 + i)

So the 3000 is reached in ~11.786 years (not 12)
LOG(3000/2000) / LOG(1.035) = 11.786....

WHAT is your question anyway? I see none...

4. ## Re: compound interest

Originally Posted by mathsgirl123431
Compound interest is interest paid on an amount and on the interest already received on that amount. You can solve compound interest questions using the formula :

A = P ( 1 + R divided by 100 ) to the power of n

where P is the amount invested initially
R is the rate of interest (percentage per year)
n is the number of years invested
A is the amount in the account at the end of ten years

A building society pays compound interest at a fixed rate of 3.5% per annum. £2000 is invested initially in an account.

What will be the value at the end of 5 years?
After how many whole years will the value of the account first reach £3000?

So is the solution: 2000 (1 + 3.5 divided by 100 ) power of 5 = £2375.37

And 12 years

No, neither of those is correct. Perhaps if you told us exactly what you did we could point out a mistake. For example in the first problem, you do want to calculate 2000(1.35)^5. But that is NOT 2375.37.

5. ## Re: compound interest

Originally Posted by HallsofIvy
No, neither of those is correct. Perhaps if you told us exactly what you did we could point out a mistake. For example in the first problem, you do want to calculate 2000(1.35)^5. But that is NOT 2375.37.
Halls, 2000(1.035)^5 = 2375.3726.....; so that one is correct. You're a generous Banker, paying 35% !

6. ## Re: compound interest

Ouch! No wonder I'm going broke!

7. ## Re: compound interest

But the question says how many whole years, so wouldn't it be 12?
Because 11.786 isn't a whole year, and after 11 years it's not yet at £3000, or am I just overthinking the question?

8. ## Re: compound interest

Originally Posted by mathsgirl123431
But the question says how many whole years, so wouldn't it be 12?
Because 11.786 isn't a whole year, and after 11 years it's not yet at £3000, or am I just overthinking the question?
Whatever. I gave you the "exact" time; you're correct with 12 as "whole years".

9. ## Re: compound interest

Okay, thanks for taking the time to show me how too work it out exactly Wilmer