compound and simple interest question

Zzainab7y ago

Hi sir, I have type of question which I did not able to answer it, the idea of question is : 400,000$ invested to make a project ,which interest you would use? 1-compound interest 4% once in 4 years. 2-simple interest 5% in first 2 years ,increases to 5.5% for next 2 years. They are asking for future value at each interest rate. Thanks alot in advance.

John MoffatTutor7y ago#1

Why are you attempting questions for which you do not have an answer? You should be using a Revision Kit from one of the ACCA approved publishers - they have answers and explanations!! (If the question is from a test that you were given, then you should demand an answer from whoever gave it to you :-) ) When it is compound interest, then the amount in 4 years time will be 400,000 x (1.04^4) (I am assuming that the question says it is 4% per annum, otherwise it would be a stupid question :-) ) When it is simply interest, then you simply calculate the interest each year at 5% of 400,000 for each of two years, and at 5.5% of 400,000 for each of the other two years, and then add them all up. I suggest that you watch my free lectures on this. The lectures are a complete free course for Paper F2 and cover everything needed to be able to pass the exam well.