Question:
In this question, give all answers correct to two decimal places.
Sam invests \($1700 \) in a savings account that pays a nominal annual rate of interest of 2.74%, compounded half-yearly. Sam makes no further payments to, or withdrawals from, this account.
(a) Find the amount that Sam will have in his account after 10 years.
David also invests $1700 in a savings account that pays an annual rate of interest of r%, compounded yearly. David makes no further payments or withdrawals from this account.
(b) Find the value of r required so that the amount in David’s account after 10 years will be equal to the amount in Sam’s account.
(c) Find the interest David will earn over the 10 years
Answer/Explanation
Ans:
Note: The first time an answer is not given to two decimal places, the final A1 in that part is not awarded.
(a) EITHER
Note: Award (M1) for an attempt to use a financial app in their technology with at least two entries seen, and award (A1) for all entries correct. Accept a positive or negative value for PV.
Note: Award (M1) for substitution into compound interest formula. Award (A1) for correct substitution.
THEN
$2231.71
(b) EITHER
N =10
PV = ± 1700
FV = ± 2231.71…
P/Y = 1
C/Y = 1
Note: Award (M1) for an attempt to use a financial app in their technology with at least two entries seen.
OR
Note: Ignore omission of opposite signs for PV and FV if r = 2.76 is obtained.
(c) $531.71