Florence invests £200 for two years at 5% compound interest paid yearly. Liam says that the interest that Florence will receive will be £20 is Liam right?

No, Liam is wrong

Step-by-step explanation:

Amount invested by Florence = £200

Formula for compound interest = P * (1 + R / 100)^Time period

P = £200

R = 5%

Time period = 2

£200 * (1 + 5/100) ^ 2

=> £200 * 1.05^2

=>£200 * 1.1025

=> £220.5

So the interest = 220.5 - 220 = 20.5

20.5 ≠ 20

Therefore, Liam is wrong.

Hope it helps :)

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