Question

1. Tristan just deposited $3,500 in an account that will earn 7.0 percent per year in compound interest for 8 years. If Jose deposits $3,500 in an account at the same time that earns simple interest, then what interest rate per year must Jose earn to have the same amount of money in 8 years from today as Tristan will have in 8 years from today?

Answer 1

To find the interest rate per year that Jose must earn to have the same amount of money as Tristan in 8 years, we can use the formula for compound interest.

Step-by-step explanation:

To find the interest rate per year that Jose must earn in order to have the same amount of money in 8 years as Tristan, we can use the formula for compound interest:

Final amount = Principal × (1 + interest rate)time

Tristan's final amount after 8 years is $3,500 × (1 + 0.07)8 = $5,759.81.

To solve for the interest rate that Jose must earn, we can rearrange the formula to:

Interest rate = (Final amount / Principal)1 / time - 1

Plugging in the values, we have Interest rate = ($5,759.81 / $3,500)1 / 8 - 1 = 0.0549, which is equivalent to 5.49% per year.