Question

Becky Anderson must pay a lump sum of $6000 in 5 yr. If only $5000 is available to deposit right now, what annual interest rate is necessary for the money to increase to $6000 in 5 yr?

Answer 1

I agree with him so he haves the answer correct

Answer 2

Hello!

Out equation is:
`A=P(1+(r)/(n) )^t^n`

A= 6000

P=5000

N=1

T=5

R= What we are trying to find

This means we will have
`6000=5000(1+r)^5`

Divide both sides by 5000:

`(6000)/(5000) = (1+r)^5`

Move the power to the other side by rooting both sides:

`(6000)/(5000) ^1^/^5 = 1+r`

Subtract 1 from both sides:

`(6000)/(5000) ^1^/^5 -1 = r`

Now we just need to calculate: R = 0.03713728...

I don't know how many decimal places you can have, but I will round to 2. This will give you an Interest Rate of 3.71%.

I hope this helps! :)