Monday, 19 January 2015

COMPOUND INTEREST 1




Salma 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 5000 sh at the end of 2 years?

solution

n=2, t=1, R=10%, A2=5000, P=?
An = P(1 + RT/100)n
A2 = P(1 + (10x1)/100)2
A2 = P(1 + 10/100)2
A2 = P(100/100 + 10/100)2
A2 = P(110/100)2  But A2=5000,
5000 = P(1.1)2  
5000 = 1.21P
5000  =  1.21P
1.21       1.21

5000  =  P
1.21      

P = 4132.23 (to 2 d.p.)

Hence at the start she invested Tsh 4132.23

TRY THIS……….

Salome invested a certain amount of money in a bank which gives an interest rate of 5% compounded annually. How much did she invest at the start if she got 12,000 sh at the end of 2 years?

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