Use the following formula for compound interest. If P dollars is invested at an annual interest rate r (expressed as a decimal) compounded n

Question

Use the following formula for compound interest. If P dollars is invested at an annual interest rate r (expressed as a decimal) compounded n times yearly, the amount A after t years is given by

A= P(1+ r/n)^nt

Required:
What rate of interest is required so that $1000 will yield $1900 after 5 years if the interest rate is compounded monthly?

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Thanh Hà 3 years 2021-08-18T16:11:02+00:00 1 Answers 0 views 0

Answers ( )

  1. Dulcie
    0
    2021-08-18T16:12:50+00:00
    Reply

    Answer:

    12.906%/year

    Step-by-step explanation:

    Given data

    Principal= $1000

    Final Amount= $1900

    Time= 5 years

    The compound interest formula is given as

    A= P(1+ r/n)^nt

    Solving for rate r as a decimal

    r = n[(A/P)1/nt – 1]

    r = 12 × [(1,900.00/1,000.00)1/(12)(5) – 1]

    r = 0.12906

    Then convert r to R as a percentage

    R = r * 100

    R = 0.12906 * 100

    R = 12.906%/year

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