Multiple choice

If £500 is invested in a bank. In how many years will it amount to £608 if rate of interest is 4% compounded annually?

  1. 6 years

  2. 5 years

  3. 4 years

  4. 3 years
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Using the compound interest formula, we have 608 = 500 * (1.04)^n, which simplifies to 1.04^n = 1.216. Calculating the powers of 1.04, we find that 1.04^5 is approximately 1.2167, making 5 years the closest integer duration for the investment to reach 608.

AI explanation

We apply the compound interest formula A = P(1 + R/100)^n, substituting the given values to get 608 = 500(1 + 4/100)^n. Dividing both sides by 500 gives 1.216 = (1.04)^n. Because 1.04 multiplied by itself 5 times equals 1.216, the required time is 5 years.

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