Rashid invests money into an account which pays a fixed rate of compound interest each year - OCR - GCSE Maths - Question 4 - 2017 - Paper 1
Question 4
Rashid invests money into an account which pays a fixed rate of compound interest each year. The value, V, of his investment after t years is given by the formula
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Worked Solution & Example Answer:Rashid invests money into an account which pays a fixed rate of compound interest each year - OCR - GCSE Maths - Question 4 - 2017 - Paper 1
Step 1
How much money did Rashid invest?
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Answer
To find out how much money Rashid invested, we can look at the formula given:
V=1250×1.03t.\n
The initial investment amount is clearly indicated as 1250. Therefore, Rashid invested £1250.
Step 2
What rate of compound interest is paid each year?
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Answer
The annual rate of compound interest can be derived from the formula.
From the formula, we see the term (1.03) indicates the growth factor.
To find the interest rate, we can use the formula:
Interest Rate=(1+r)⟹1+r=1.03
So, r=1.03−1=0.03
Thus, the annual compound interest rate is 3%.
Step 3
Circle the graph that best represents the growth in Rashid's account.
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Answer
To represent the growth of the investment, we need to identify the graph that shows an exponential growth pattern due to compound interest. The correct graph to circle is the third graph, which displays this growth correctly.
