MATH SOLVE

4 months ago

Q:
# 9. Barbara invests £14,000. In the first year, she earns 5.9% interest. In the second year, she earns 3.2% interest, a. What was the total percentage increase over the 2 years?

Accepted Solution

A:

Answer:Step-by-step explanation:Use future value formula to get the total amount at the end of year 1 and year 2;First, find FV at the end of 1 year.FV = P(1+r)^n P = principal amount or amount invested in present value terms = 14,000r= discount rate = 5.9% OR 0.059 as a decimaln= total duration of investment = 1FV = 14,000(1.059)^1FV= 14,826Next, find FV of 14,826 at the end of year 2;P = principal amount or amount invested in present value terms = 14,826r= discount rate = 3.2% OR 0.032 as a decimaln= total duration of investment = 1FV = P(1+r)^n FV = 14,826 (1.032)^1FV = 15,300. 432Percentage increase =[ (New value - Old value)/Old value] *100 = [ (15,300.432 - 14,000)/14,000] *100 = (1,300.432/14,000)*100 = 9.2888Therefore total percentage increase over the 2 years = 9.29%