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26 May, 13:46

What is the interest rate if a principal of $602 earns $95.88in interest compounded annually in five years?

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  1. 26 May, 15:26
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    Future value = principal+interest

    Fv=602+95.88=697.88 now the future value in known

    To find r set the equation and solve for r

    Fv=p (1+r) ^n

    697.88=602 (1+r) ^5

    697.88/602 = (1+r) ^5

    R = (697.88/602) ^ (1/5) ]-1

    R=2.99%
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