Alexandra invests £2485 into an savings account.Alexandra gets 2.75% per year compound interest.Work out how much Alexandra will have in the account after 19 years.
Question
Alexandra invests £2485 into an savings account.Alexandra gets 2.75% per year compound interest.Work out how much Alexandra will have in the account after 19 years.
Solution
To calculate the amount Alexandra will have in her account after 19 years, we will use the formula for compound interest, which is:
A = P (1 + r/n) ^ nt
Where: A = the amount of money accumulated after n years, including interest. P = principal amount (the initial amount of money) r = annual interest rate (in decimal) n = number of times that interest is compounded per year t = time the money is invested for in years
In this case: P = £2485 r = 2.75% or 0.0275 in decimal form n = 1 (since it's compounded annually) t = 19 years
Substituting these values into the formula, we get:
A = £2485 * (1 + 0.0275/1) ^ (1*19)
Now, calculate the values inside the brackets:
A = £2485 * (1.0275) ^ 19
Finally, calculate the exponent and then the multiplication:
A = £2485 * 1.689262
A = £4198.57
So, Alexandra will have £4198.57 in the account after 19 years.
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