When "P" Dollars is invested at interest rate "i", compounded annually, for "t" tears, the investment grows to "A" dollars, where A=P (1+i) ^t. When Sara enters 11th grade, her grandparents deposit $10,000 in a college savings account. Find the interest rate "i", if the $10,000 grows to $11,193.64 in two years.

Question

Mathematics

Ronald Rush

26 July, 06:52

When "P" Dollars is invested at interest rate "i", compounded annually, for "t" tears, the investment grows to "A" dollars, where A=P (1+i) ^t. When Sara enters 11th grade, her grandparents deposit $10,000 in a college savings account. Find the interest rate "i", if the $10,000 grows to $11,193.64 in two years.

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Lilian · Answer 1

The interest rate is 0.58, or 58 percent.

11,193.64 = 10,000 (1 + i) ^2

Divide each side by 10,000.

1.119364 = (1 + i) ^2

Take the square root of both sides.

1.058 = 1 + i

Subtract 1

i = 0.58