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interest rate

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › interest rate

  • This topic has 1 reply, 2 voices, and was last updated 4 months ago by John Moffat.
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  • May 30, 2023 at 8:32 pm #685532
    kashafaltaf500
    Participant
    • Topics: 29
    • Replies: 10
    • ☆

    a person invests $600 for a period of 8 years
    interest is compounded at the rate of 5% per annum for the first 3 years, and 6% per annum for the remaining 5 years.
    how much will they have at the end of 8 years (to the nearest $)

    hi can you please explain me how to solve this. it is from the practice questions of chapter 22.

    May 31, 2023 at 8:34 am #685570
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 53169
    • ☆☆☆☆☆

    I am puzzled why you are asking this because the approach is explained in the free lectures and the workings are shown when you review your answers to the questions!

    For each of the first 3 years you multiply by 1.05 to add on 5% interest each year, and you then multiply by 1.06 for each of the remaining 5 years so as to add on 6% each year.

    So the end result is 600 x 1.05^3 x 1.06^5

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