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What interest rate would be necessary to obtain $6,500 in 8 years if $5,000 is the amount of the original investment and the interest is compounded yearly?

Sagot :

The formular is

[tex]A=P(1+\frac{r}{n})^{nt}[/tex][tex]6500=5000(1+\frac{r}{1})^{1\times8}[/tex][tex]\frac{6500}{5000}=(1+r)^8[/tex][tex]1.3=(1+r)^8[/tex][tex]1.3^{\frac{1}{8}}=(1+r)^{8\times\frac{1}{8}}[/tex][tex]1.3^{0.125}=1+r[/tex][tex]1.0333=\text{ 1+r}[/tex]

subtract 1 from bothside

[tex]r\text{ = 0.0333}[/tex]

R = 0.0333 x 100% = 3.33%

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