Answered

Adam decides to invest £350 in the Monthly Goal account for 3 years.
The account pays an AER rate of 5.54% p.a.
Will Adam have sufficient money in his Monthly Goal account to buy a motor scooter for £410 in 3
years time?
You must show all your working and give a reason for your answer.



Answer :

sqdancefan

Answer:

  Yes

Step-by-step explanation:

You want to know if Adam will have sufficient money to buy a scooter for £410 from his investment of £350 at 5.54% AER for 3 years.

Account value

The value of the account earning effective rate r for n years is ...

  A = P(1 +r)^n

For a principal of £350, the value after 3 years is ...

  A = £350(1 +0.0554)³ ≈ £411.45

This balance is sufficient for Adam to buy a scooter for £410.

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