GIVEN
A compound interest account with a principal of $9500 accumulating to $11346 in 7 years, compounded annually.
TO FIND
The interest rate.
SOLUTION
The compound interest formula is given to be:
where
A = final amount
P = initial principal balance
r = interest rate
n = number of times interest applied per time period
t = number of time periods elapsed.
From the question, the following parameters are seen:
Therefore:
Solve for r:
Multiply by 100:
ANSWER
The interest rate required to get a total amount of $11,346.00 from compound interest on a principal of $9,500.00 compounded once per year over 7 years is 2.57% per year.