Question

The formula A = P(1 + r)^2 is used to find the amount of money, A, in an account after P dollars have been invested in the account paying an annual interest rate, r, for 6 years. Find the interest rate r if $1,500 grows to $2,535 in 6 years.

Answer 1

The interest rate after 6 years would be 5%.

Explanation:

The proper equation for simple interest over time is A=P(1+rt), where 'A' is the amount of money after the principal amount 'P' has been invested at an interest rate 'r' over a certain amount of time 't'. In order to find the interest rate 'r', we need to plug in the given values of the other variables. So, $2535=$1500(1+6r). To solve, we need to first divide both sides of the equation by 1500 to get 1.3 = 1 + 6r, then subtract 1 from both sides to get 0.3=6r, then divide both sides again by 6 in order to get the final answer of 0.05, which when multiplied by 100 gives us a percentage of 5%.