Claudia invests £25000 at a rate of 2% per year compound interest - OCR - GCSE Maths - Question 10 - 2019 - Paper 4

To calculate the total amount of interest earned, we can use the formula for compound interest:

$A = P(1 + r)^n$

Where:

• $A$ is the total amount after $n$ years,
• $P$ is the principal amount (£25000),
• $r$ is the annual interest rate (0.02), and
• $n$ is the number of years (5).

Plugging in the values, we have:

$A = 25000(1 + 0.02)^5$

Calculating this gives:

$A = 25000(1.02)^5$ $A = 25000(1.1040808)$ $A ≈ 27602.02$

Now, the total interest earned over 5 years is the total amount minus the principal:

Total Interest = $A - P = 27602.02 - 25000 = 2602.02$

Thus, the total amount of interest earned after 5 years is £2602.02.