Math Problem Statement

Maye invests 5200 euros in a savings account for 4 years. She gets 2.5% per year compound interest. Work out how much Maye will have in the account after 4 years.

Solution

To calculate the amount in the account after 4 years with compound interest, we use the formula:

A=P(1+rn)ntA = P \left(1 + \frac{r}{n}\right)^{nt}

where:

  • AA = the amount of money accumulated after n years, including interest.
  • PP = principal amount (initial investment).
  • rr = annual interest rate (decimal).
  • nn = number of times that interest is compounded per year.
  • tt = number of years the money is invested.

Given:

  • P=5200P = 5200 euros
  • r=0.025r = 0.025 (2.5% as a decimal)
  • n=1n = 1 (interest is compounded annually)
  • t=4t = 4 years

Now plug in the values:

A=5200(1+0.0251)1×4A = 5200 \left(1 + \frac{0.025}{1}\right)^{1 \times 4} A=5200(1+0.025)4A = 5200 \left(1 + 0.025\right)^{4} A=5200(1.025)4A = 5200 \left(1.025\right)^{4} A=5200×1.10381289065739.42 eurosA = 5200 \times 1.1038128906 \approx 5739.42 \text{ euros}

So, Maye will have approximately 5739.42 euros in the account after 4 years.

Do you want details or have any questions? Here are some related questions to consider:

  1. How would the amount change if the interest rate were higher?
  2. What would the total be after 10 years at the same interest rate?
  3. How much interest did Maye earn in total over the 4 years?
  4. If Maye added an extra amount each year, how would that affect the total?
  5. What is the difference between simple and compound interest in this scenario?

Tip: Always consider how frequently interest is compounded, as it can significantly impact the total amount accumulated over time.

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Math Problem Analysis

Mathematical Concepts

Compound Interest
Exponential Growth

Formulas

A = P(1 + r/n)^(nt)

Theorems

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Suitable Grade Level

Grades 9-11