Question

If a 5,000 investment earn $1,575 interest over over 18 years what is the annual interest rate

Answer 1

I = 1575 / 5000 = 31.5 % interest on investment

(1 + i)^18 = 1.315 where i interest is earned per year

One can use logs or

1 + i = 1.315^1/18 = 1.0153

So the annual interest rate is .0153 or 1.53%

Or

5000 (1 + i)^18 = 6575

(1 + i)^18 = 1.315

18 log (1 + i) = log 1.315

log (1 + i) = .006607

1 + i = 1.0153

i = .0153 = 1.53%