What is the effective rate of interest if $1,000 compounds to $1,331 in 3 years? The effective rate of interest, if $1,000 compounds to $1,331 in 3 years is %.

Question

asked Apr 12, 2022 101k views

1 Answer

Josmarie · Answer 1 · 2022-04-17T16:30:58+0000

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Answer:

10%

Explanation:

The compound interest formula is ...

A = P(1 +r)^t

Filling in the given values, we have ...

1331 = 1000(1 +r)^3

1.331^(1/3) = 1 +r = 1.1 . . . . . divide by 1000, take the cube root

r = 0.1 = 10% . . . . . . . subtract 1

The effective rate is 10% per year.