Question

A deposit of $2400 in a savings account reaches a balance of $2960.05 after 7 years. The interest on the account is compounded monthly. What is the annual interest rate of the account? (Round your answer to the nearest whole number.)

Answer 1

See attached formula:
exponent = log (total/principal) / (n*years)
where "n" is the number of compounding periods per years
exponent = log (2,960.05 / 2,400) / (12*7)
exponent = 0.091087805353 / 84
exponent = 0.091087805353 / 84
exponent = 0.0010843786

rate = (10^exponent -1) * 12
rate = (10^0.0010843786 -1) *12
rate = ( 1.0024999939 -1) * 12
rate = ( 0.0024999939 ) * 12
rate = 0.0299999268
rate * 100 =
2.99999268
rate = 3% (rounded)