Pei's savings account balance is $12,000 today. Pei opened the account exactly 7 years ago with a $10,000 deposit. Pei has made no other deposits or withdrawals. What annual interest rate (compounded annually) has the account earned?

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Business

Snake

19 July, 03:15

Pei's savings account balance is $12,000 today. Pei opened the account exactly 7 years ago with a $10,000 deposit. Pei has made no other deposits or withdrawals. What annual interest rate (compounded annually) has the account earned?

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Answers (1)

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Sloane Hunt · Answer 1

2.64%

Explanation:

A = P (1 + r) ^n

A = $12,000

P = $10,000

n = 7 years

12,000 = 10,000 (1 + r) ^7

(1 + r) ^7 = 12,000/10,000 = 1.2

(1 + r) ^7 = 1.2

1 + r = (1.2) ^1/7

I + r = 1.0264

r = 1.0264 - 1 = 0.0264

r = 0.0264 * 100 = 2.64%