Question

Find the required annual interest rate to the nearest tenth of a percent for $5000 to grow to $8500 if the interest is compounded yearly for 3 years.

Answer 1

19.4%

Explanation:

Using the compound interest relation :

A = P(1 + r)^t

A = final amount ; r = rate ; t = time ; P = amount invested

8500 = 5000(1 + r)^3

8500 / 5000 = (1 + r)^3

1.7 = (1 + r)^3

Take the cube root of both sides

1.1935 = 1 + r

1.1935 - 1 = r

r = 0.1935

r in % = 0.1935 * 100% = 19.35%

= 19.4%