Jasmina invests £1200 in a savings account which pays compound interest at the rate of 2% per year for 7 years.
To the nearest pound, what is her investment worth at the end of the 7 years?
We want an increase of 2% per year, this is equivalent to a multiplier of 1.02, or 102% of the original amount
This multiplier is applied 7 times;
Therefore the final value after 7 years will be
Round to the nearest pound
Alternative method
Or use the formula for the final amount
Substitute P is 1200, r = 2 and n = 7 into the formula
£1378 (to the nearest pound)
Mercy buys a car for £20 000. Each year its value depreciates by 15%.
Find the value of the car after 3 full years.
Identify the multiplier
100% – 15% = 85%
p = 1 – 0.15 = 0.85
Raise to the power of number of years
0.85 ^{3}
Multiply by the starting value
£20 000 × 0.85 ^{3}
= £12 282.50
Alternative method
Or use the formula for the final amount
Substitute P is 20 000, r = 15 and n = 3 into the formula
£12 282.50