Answer
a). Amount received after 5 year A = 14163.2
b). Interest = 1663.2
Work Step by Step
a).
Saving on first year = 2500
Compound interest rate is 6.25% = 0.0625
Amount received after n year A = $\frac{P [(1 + \frac{r}{n})^{n\times t} - 1]}{\frac{r}{n}}$
Amount received after 5 year A = $\frac{2500 [(1 + \frac{0.0625}{1})^{1\times 5} - 1]}{\frac{0.0625}{1}}$
= $\frac{2500 [(1 + 0.0625)^{5} - 1]}{0.0625}$
= $\frac{2500 [(0.4356]}{0.0625}$
= 2500 $\times$ 5.665= 14163.2
b). Interest = 14163.2 - (2500$\times$5) = 14163.2 - 12500 = 1663.2
