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If an amount of money, called principle, p, is deposited into an account that earns interest at a rate r, compound annually, then in two years that investment will grow to an amount A, given by the formula A=P(1+r)^2. If a principle amount of $5000 grows to $5940.50 in two years, what is the interest rate?

Respuesta :

All u gotta do is plug numbers substituted by the variable into the equation.
A = P(1+r)^t
A = $5940.50 
P = $5000
r = ?
t = 2yrs
$5940.50 = $5000(1+r)^t
--------------    --------------------
  $5000            $5000
1.1881 = (1+r)^2
sqrt(1.1881) = 1+r
1.09 = 1+r
     -1     -1
-------   ----
0.09 = r
r = 0.09

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