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Compound Interest Q1. Find how much money there is in the bank account after the specified number of years in each case. Amount of money Years in bank account Interest rate £4500 7 10% £760 12 3% £22000 30 0.6% £1754 22 1.25% How often the money is compounded Annual Twice a year Quarterly Monthly Q2. Gareth has £2000 and is looking for a savings account. HSBC offer him an account which will give him quarterly interest of 3% on his money for 2 years and then 0% interest after that. NatWest offer him an account which will give him annual interest of 5% on his money for 3 years and then 0% interest after that. Lloyds offer him an account which will give him monthly interest of 0.25% on his money for 5 years and then 0% interest after that. Gareth wants to spend his money after 5 years. Which bank should he choose? Q3. Laura has £250 and wants to buy a computer which costs £400. She puts the money in a bank account which gives her monthly interest of 2.1%. How many months will it take her to buy the computer? Q4. Martin wants to buy a wedding ring but doesn’t quite have enough money. He takes out a shortterm loan of £500 from quickquid.co.uk. The amount he owes increases by 130% monthly. How much does he owe if he pays nothing for 6 months? Q5. Vicky has a student loan of £42,500 which gains 6% interest every year. If she hasn’t repaid it after 30 years the debt will disappear. a. If she doesn’t pay anything towards it how much debt does she have at (i) 10 years (ii) 20 years (ii) 30 years b. Her grandpa leaves her £20,000. She puts it in a bank account which gives her 7.25% interest i) Amount of money Years in bank Interest rate How often the money is compounded Annual £4500 7 10% £8,769.22 Twice a year £17,088.74 £760 12 3% £1,083.58 £1,533.92 £22000 30 0.6% £26,324.62 £31,499.35 £45,100.40 £189,537.76 £1754 22 1.25% £2,305.26 £5,233.50 £46,592.71 £3,029.78 Compound Interest Answers Q1 Q2. HSBC £2533.54 Q3 23 Q4 £74,017.94 NatWest £2,561.65 Lloyds £2,323.23 Quarterly Monthly £64,894.47 £13,495,782.39 £3,140.51 £53,625.82