An investment fund has increased in value by a total of 21% over the last 2 years.
a)A man invested £1000 in the fund two years ago.What is it worth now?
b)Calculate the yearly rate of interest assuming that it was: i)Compound interest ii)Simple Interest
working please
It is worth $1210 now the interest earned is $210
Simple interest
I = Prt
210 = 1000(r)2
210 = 2000 (r)
r = .105 = 10.5% = simple interest rate
Compound Interest
1210 = 1000(1+ r)2 Divide both sides by 1000
1.21 = (1 + r)2 Take the log of both sides
log 1.21 = log (1 + r)2 By a property of logs, we have
log 1.21 = 2 log (1 + r) divide by 2 on each side
(log 1.21) / 2 = log (1 + r)
.041392685158225 = log (1 + r)
So we have
10.041392685158225 = r + 1
1.099999999999999897 = r + 1 subtract 1 from both sides
r = .0999999 = 9.99999% = 10% = compound interest rate