The value of an endowment policy increases at the rate of 5% per annum.
The initial value is £7000.
(a) Write down a recurrence relation for the policy’s value after n years.
(b) Calculate the value of the policy after 4 years.
Hi Snowwhite,
Initial value = 7000
After 1 year = 7000 + 5% of 7000 => 7000 + 0.05*7000 => 7000 * (1+0.05) => 7000 * 1.05
After 2 years = (7000 * 1.05) * 1.05 => 7000 * 1.05 * 1.05 => 7000 * 1.05 2
after 3 years = (7000 * 1.05 2 * 1.05 => 7000 * 1.05 3
Can you see the pattern?
You can answer your own questions now.
+4 
+118653 
