Friday 21 March 2014

COMPOUND INTEREST A1

Catherine invested a certain amount of money in a bank which gives an interest rate of 20% compounded annually. How much did she invest at the start if she got 8,000 sh at the end of 3 years?


Solution

n=3, t=1, R=20%, A3=8000, P=?

An = P(1 + RT/100)n

A3 = P(1 + (20x1)/100)3

A3= P(1 + 20/100)3

A3 = P(100/100 + 20/100)3

A3 = P(120/100)3  But A3=8,000,

8,000 = P(1.2)3  = P(1.2x1.2x1.2)  

8,000 = 1.728P

8000  =  1.728P
1.728      1.728

8000  =  P
1.728

P = 4629.63 (to 2 d.p)

Hence at the start she invested Tsh 4629.63


TRY THIS…………………

Baba Koku invested a certain amount of money in a bank which gives an interest rate of 10% compounded annually. How much did she invest at the start if she got 7,000 sh at the end of 4 years?





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