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Asked by Kayleigh

If £2000 is placed into a bank account that pays 3% compound interest per year, how much will be in the account after 5 years?

Hi Kayleigh, You would need to use the compound interest formula here, which is Final amount = initial amount x interest rate^years. -- The initial and final amounts are both in pounds -- The interest rate is a percentage change displayed as a decimal (ie. a multiplier). For instance, if there was a 7% increase, it would be x1.07 because the next amount is the original amount (the '1') plus the added 7% (the extra '0.07'). --The number of years is added as a power to the percentage change multiplier. It shows how many times the interest has been calculated and added, because each year there is a larger amount in the bank, so you get more interest as well! So, for this example, you would do: Final amount = £2000 x 1.03^5 Final amount = £2000 x 1.15927.... (leave it in the calculator) Final amount = £2318.548.... which rounds to £2318.55 Please message me for any clarification :) Hope that helps! :)

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