Question

£2000 is invested in a savings account. Compound interest at 2.1% P.A.

How much interest will be paid after two years?

A) £4 B) £5.20 C) £2.44 D) £84.88

Answer 1

`\sf\ 2.1\ percent\ interest\ P.A.\ means\ annually.\ Annually\ means\ every\ year.\\\\ The\ question\ requires\ a\ compound\ interest\ formula.\\\\\ The\ formula\ is\\{\boxed{A=P(1+ (r)/(n))^n^t}`




`\sf\ P\ =\ principal\ amount\ (2000)\\\\ r\ =\ annual\ rate\ of\ interest\ (.021)\\\\ t\ =\ number\ of\ years\ the\ amount\ is\ deposited\ or\ borrowed\ for\ (2)\\\\ A\ =\ amount\ of\ money\ accumulated\ after\ n\ years,\ including\ interest\ (?)\\\\ n\ =\ number\ of\ times\ the\ interest\ is\ compounded\ per\ year\ (1)\\\\\\\\A=P(1+ (r)/(n))^n^t\\\\A=2000(1+ (.021)/(1))^2\\\\A=2000(1.021)^2\\\\A=2000(1.042441)\\\\\A=2084.882\\\\\\\ To\ find\ the\ amount\ of\ interest:\\2084.882-2000=84.882=\\\\{\boxed{84.88}`




`\boxed{\sf\ Answer:\ D}`