Answer to Question #178774 in Financial Math for anju

Question

an investor puts £5000 in a savings account that pays 10% simple interest at the end of each year. compare how much the investor would have after 6 years if the money was invested for 6 years?

Answer 1

If invested

$A= P(1+rt)$

where A = new balance

t= time

r= rate in decimals

P = Amount invested

$A= 5000 (1+01*6)$

$=5000(1.6)$

$= 8000$

£8000

In a Savings account

$A=P(1+r/n)^n*^t$

n= number of times its compounded

$A=5000(1+0.1/1)^1*^6$

$A=5000(1.1)^6$

$= 8857.805$

£8858

The investor will have £858 more if he saves