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?

Question

Mathematics

Skylar Ellis

16 November, 06:02

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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Answers (1)

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Mya Garner · Answer 1

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%