Final answer:
To determine the annual rate of return earned by Fred on his investment, we can use the formula for compound interest: final balance = principal x (1 + interest rate)^time. Given that Fred deposited $2,700 and his account balance after 9 years is $4,025, the annual rate of return is approximately 4.65%.
Step-by-step explanation:
To determine the annual rate of return earned by Fred on his investment, we can use the formula for compound interest:
Final balance = Principal x (1 + Interest Rate)^Time
Given that Fred deposited $2,700, and his account balance after 9 years is $4,025, we can plug these values into the formula:
$4,025 = $2,700 x (1 + Interest Rate)^9
Divide both sides of the equation by $2,700:
(1 + Interest Rate)^9 = 1.491
Take the 9th root of both sides of the equation to solve for the interest rate:
1 + Interest Rate = 1.491^(1/9)
Subtract 1 from both sides of the equation:
Interest Rate = 1.491^(1/9) - 1
Using a calculator, we find that the interest rate is approximately 4.65%.