Question

2.June Cunningham deposited $54,200 in the bank on January 1, 2006. On January 2, 2016, this deposit has accumulated to $106,611. Interest is compounded annually on the account. What rate of interest did June earn on the deposit

Answer 1

Interest rate= 4.61%

Step-by-step explanation:

The future value of an investment is the accumulated sum(principal plus interest ) after being invested at a particular rate for certain period of time.

FV = PV × (1+r)^(n)

FV =Future Value - 106,611

PV = Present Value -$54,200

r- interest rate- ?

n- 15 years

So substituting into the formula, we have

106,611= 54,200 × ( 1+r)^15 =

(1+r)^15= 106,611/54200

(1+r)^15= 1.96699262/15

find the log of both sides

15 log (1+R) = log 1.9669

Log 1+r = log 1.9669/15

Log 1+r = 0.019586849

finding the log inverse

1+r = 1.046132872

r = 1.046132872 -1

= 4.61%