Question

Hannah would like to make an investment that will turn 6500 dollars into 25000 dollars in 6 years. What quarterly rate of interest, compounded four times per year, must she receive to reach her goal? A

Answer 1

5.773 %.

Explanation:

The interest is compounded 6 *4 = 24 times in 6 years.

Amount after 6 years =

25,000 = 6,500 ( 1 + r) ^24 where r is the quarterly rate of interest.

( 1 + r) ^ 24 = 3.8462

24 ln (1 + r) = ln 3.8462

ln (1 + r) = ln 3.8462 / 24

ln (1 + r) = 0.056129

1 + r = e^0.056129 = 1.05773

r = 0.05773

= 5.773 %