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26 March, 00:14

Find the annual rate of growth (interest rate) on an account that was worth $200 in 1975 and $415.79 in 1990

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  1. 26 March, 00:25
    0
    The percent change from one period to another is calculated from the formula:

    Where: PR = Percent Rate

    VPresent = Present or Future Value

    VPast = Past or Present Value The annual percentage growth rate is simply the percent growth divided by N, the number of years.

    (415.79-200) / 200*100=107.89

    The annual percentage growth rate is simply the percent growth divided by N, the number of years.

    107.89/15=7.193
  2. 26 March, 01:58
    0
    Use the following model for compound interest:

    A = P (1+r) ^5, where A is the accumulated amount, P is the principal or original amount, r is the annual interest rate (as a decimal fraction), and t is the number of years that have elapsed.

    Let 1975 be year 0, i. e., t=0; let 1990 be year 15 (15 years after 1975).

    Here's what you have in year 0: $200=P (1+r) ^0. Thus, P=$200.

    Here's what you have in year 15: $415.79 = $200 (1+r) ^15

    Solve this equation for r (as a decimal fraction).
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