Question

Alex invests £4000 for 7 years.

His investment pays compound interest of x% per annum.
At the end of the 7 years Alex’s investment is worth £5263.73
Work out the value of x

Answer 1

Explanation:

Use the equation

`A(t)=P(1+r)^t` and fill it in using the info we were given:

`5263.73=4000(1+r)^7` Begin by dividing both sides by 4000 to get

`1.3159325=(1+r)^7` and take the 7th root of both sides to "undo" that 7th power on the right. Doing that gives us

1.04 = 1 + r so

.04 = r and the interest rate is 4%