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11 September, 12:41

The formula A=P (1+r) ^2 gives the amount A in dollars that P dollars will grow to in 2 years at interest rate R (where r is given as a decimal), using compound interest. What interest rate will cause $ 5000 to grow to $ 5304.50 in 2 years?

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  1. 11 September, 13:58
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    P=presne amount=5000

    A=furutre amount which you want to be 5304.50

    solve for r

    5304.50=5000 (1+r) ^2

    divide both sides by 5000

    1.0609 = (1+r) ^2

    sqrt both sides (remember to get positive and negative roots)

    +/-1.03=1+r

    minus 1 both sides

    +/-1.03-1=r

    +1.03-1=r=0.03=3%

    -1.03-1=r=-2.03=false, no negative percents

    answer is 3%
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