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Luke invested £4000 in a savings account for 3 years.
Compound interest was paid at a rate of 1.8% each year.
Alexa also invested £4000 in a savings account for 3 years.
Simple interest was paid at a rate of 1.8% each year.
Luke got more interest than Alexa in total over the 3 years.
How much more?
You must show all your working.

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Parrain

Answer: $3.91

Step-by-step explanation:

Luke investment:

This is compound interest so the future value formula will be used:

= Amount * ( 1 + rate) ^ no. of years

= 4,000 * ( 1 + 1.8%)³

= $4,219.91

Alexa investment:

Simple interest is calculated with the formula:

= Amount * ( 1 + rate * time)

= 4,000 * ( 1 + 1.8% * 3)

= $4,216

Amount Luke made more than Alexa:

= 4,219.91 - 4,216

= $3.91

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