Question

A company invests $15,000.00 in an account that compounds interest annually. After two years, the account is worth $16,099.44. Use the function in which r is the annual interest rate, P is the principal, and A is the amount of money after t years. What is the interest rate of the account?

A = P(1 + r)t

1.04%
3.6%
5.4%
7.3%

Answer 1

Principal = $15000
Amount = $16099.44
Rat of interest = r
Time = 2 years
Then
A = P(1 + r)^t
16099.44 = 15000 (1 + r)^2
(1 + r)^2 = 1.073
(1 + r)^2 = (1.036)^2
Then
1 + r = 1.036
r = 1.036 - 1
= 0.036
= 0.036/100
= 3.6%
From the above deduction, it can be easily concluded that the correct option among all the options that are given in the question is the second option.