Question

If $3800 is invested in a savings account for which interest is compounded

quarterly, and if the $3800 turns into $4300 in 2 years, what is the interest
rate of the savings account?

Answer 1

6.22%

Explanation:

Answer 2

Explanation:

The formula to use for this is

`A(t)=P(1+(r)/(n))^((n)(t))`

For us,

A(t) = 4300

P = 3800

n = 4

t = 2

r = ?

Let's fill in what we have then:

`4300=3800(1+(r)/(4))^((4)(2))`

which simplifies a tiny bit to

`4300=3800(1+(r)/(4))^8`

The first thing to do is to divide both sides by 3800 to get

`(4300)/(3800)=(1+(r)/(4))^8`

Now take the 8th root of both sides (on your calculator, of course!) to get

`1.01557174=1+(r)/(4)`

Now subtract 1 from both sides to get

`.01557174=(r)/(4)`

And multiply both sides by 4 to get

.0622869598 = r

Multiply by 100 to get the rate as a percentage. It rounds to

r = 6.23%