Ratna invests £1200 for 2 years in a bank account paying r% per year compound interest. At the end of 2 years, the am

Ratna invests £1200 for 2 years in a bank account paying r% per year compound interest.

At the end of 2 years, the amount in the bank account is £1379. 2.

Calculate r

1 thought on “Ratna invests £1200 for 2 years in a bank account paying r% per year compound interest. At the end of 2 years, the am”

  1. In order to acquire a total of £1379. 2 from compound interest on a principal of £1,200 compounded once per year for two years, an interest rate of 7.207% per year is needed.
    Formula for compound interest is –
    A = P(1+r/n)^nt
    Where, A = Amount at the end of investment
                 P = Principal Amount or amount invested
           r = rate of interest
          n = number of times interest applications per period.
           t = number of time periods elapsed
    Here in the question A is £1379. 2
              P = £1,200
              t = 2 years
              n = 1 (annually)
    Solving for rate r as a decimal
    r = n[(A/P)1/nt – 1]
    r = 1 × [(1,379.20/1,200.00)1/(1)(2) – 1]
    r = 0.0720696
    Then convert r to R as a percentage
    R = r * 100
    R = 0.0720696 * 100
    R = 7.207% per year
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