Question

When Rahul began 7th grade, he put his savings of $3,000 in an account that compounded interest annually. He hoped to have $6,000 by the time he graduates high school in six years. What interest rate is required for him to reach his goal?

An interest rate of
% is required.

Answer 1

12%

Explanation:

You are going to want to use a modified compound interest formula, as shown below. This version of the compound interest formula is what you use to solve for the interest rate.

`r=n[((A)/(P))^(1/nt)-1]`

r = interest rate (decimal)

n = numbers of times compounded (annually)

A = total amount

P = principal amount

t = time (years)

Now, lets plug in the values:

`r=1[((6,000)/(3,000))^(1/(1)(6))-1]`

`r=.12246`

Next, multiply r by 100 to get our answer:

`.12246(100)= 12.246`

The last step is to round our answer to the nearest whole number:

12.246 -> 12