Question

If you deposit $1000 in a savings account with an interest rate of r compounded annually, then the balance in the account after 3 years is given by the function B(c)=1000(1+r)^3 where r is as a decimal. What is the formula for the interest rate, r, required to achieve a balance of B after three years?

a. r=1+(cubroot of B)/10
b. r=-1+(cubroot of B)/-10
c. r=-1+(cubroot of B)/10
d. r=-1+10/(cubroot of B)

Answer 1

The problem involves compound interest of a present worth value to future worth value. In this case, we are given with a principal of $1000 and stated that after three years, $1100 is obtained. The rate is obtained from 1100 = (1+r)^3 *1000. r then is equal to 3.23%. Answer is A.