An investor deposits £1,000 into an account that pays interest at the rate of 3%...

Compound Interest Formula:A=P×(1+r)nA = P \times (1 + r)^nA=P×(1+r)n

P: Initial principal (£1,000)

r: Annual interest rate (3% or 0.03)

n: Number of years (5)A=1,000×(1+0.03)5A = 1,000 \times (1 + 0.03)^5A=1,000×(1+0.03)5A=1,000×(1.159274)A = 1,000 \times (1.159274)A=1,000×(1.159274)A=£1,157.63A = £1,157.63A=£1,157.63

Elimination of Other Options:

All other values result from incorrect application of the formula or ignoring compounding.

References:

ICWIM Module 2: Focus on time value of money and compounding.