Heather has been gifted £10,000 by a relative. She decides to spend £3,000 on a holiday and then invest the remaining money.
Heather invests £7,000 for 2 years in an account paying compound interest.
In the first year, the rate of interest is 3%.
In the second year, the rate of interest is 1.5%.
Work out the value of Heather’s investment at the end of 2 years.
Answer:
Firstly we find out the value of her investment after the first year.
7000 x 1.03 = 7210
And then after the second year:
7210 x 1.015 = £7318.15