Question

Mary invests £12,000 in a savings account the account pays 1.5% compound interest per year work out the value of her investment after 2 years.​

Answer 1

The value of Mary's investment after two years = £12362.7

Explanation:

P = Principal / initial amount

R = rate of interest per cent per year

T = number of years

A = final amount at the end of T years

Then:

A = P*(1 + R/100)^2

In our example:

P = £12000

R = 1.5 per cent per year

T = 2 years

Thus:

A = 12000*(1 + 1.5/100)^2

= 12000*(1 + 0.015)^2

= 12000*(1.015)^2

= 12000*(1.030225)

= 12362.7

Value of investment after two years = £12362.7