Charlie invests £9000 at a rate of 0.7% per year compound interest - OCR - GCSE Maths - Question 24 - 2021 - Paper 1
Question 24
Charlie invests £9000 at a rate of 0.7% per year compound interest.
Calculate the total amount of interest Charlie will have earned after 5 years.
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Worked Solution & Example Answer:Charlie invests £9000 at a rate of 0.7% per year compound interest - OCR - GCSE Maths - Question 24 - 2021 - Paper 1
Step 1
Calculate the total amount after 5 years using the compound interest formula
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Answer
The formula for compound interest is given by:
A=P(1+r)n
where:
A is the amount of money accumulated after n years, including interest.
P is the principal amount (the initial amount of money).
r is the annual interest rate (decimal).
n is the number of years the money is invested or borrowed for.
In this case, we have:
P = £9000
r = 0.7/100 = 0.007
n = 5
Substituting these values into the formula gives:
A=9000(1+0.007)5
Calculating this:
A=9000(1.007)5
Using a calculator to find (1.007)5:
A≈9000imes1.03535≈9321.17
Step 2
Calculate the total interest earned
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Answer
To find the total interest earned, subtract the initial principal from the total amount:
Interest=A−P
Substituting in our values:
Interest=9321.17−9000=321.17
Thus, the total amount of interest Charlie will have earned after 5 years is approximately £321.17.
