Question

Your $8800 investment grows to $15600 over the course of 5 years compounded quarterly. What interest rate did you receive on your investment? (Write your answer with at least four decimal points) Your interest rate is r =

Answer 1

Given:

The initial amount is $8800.

The Future value is $15600.

Number of year = 5 years compounded quarterly .

The interest rate is calculated as,

`\begin{gathered} FV=P(1+(r)/(4))^(4* n) \\ 15600=8800(1+(r)/(4))^(4*5) \\ (39)/(22)=(1+(r)/(4))^(20) \\ \sqrt[20]{(39)/(22)}=1+(r)/(4) \\ (r)/(4)=\sqrt[20]{(39)/(22)}^{}-1 \\ r=4(\sqrt[20]{(39)/(22)}-1) \\ r=0.1162 \end{gathered}`

Answer: the interest rate is 0.1162.