SOLUTION: If P20,000 invested at interest compounded annually amounts to P21,218 in two years, what is the rate of interest?

Question 1057528: If P20,000 invested at interest compounded annually amounts to P21,218 in two years, what is the rate of interest?
Answer by math_helper(2461) (Show Source): You can put this solution on YOUR website!
We'll need the compound interest formula:

�
Where:
F = future value (or final value)
P = present value
n = number of compounding periods per year
r = rate, expressed as a decimal (so 4% is 0.04)
t = number of years
�
We know:
P = 20000
F = 21218
t = 2
n = 1 (compounds once per year)
We need to solve for r
Plugging in these values gives:

( sqrt of both sides )

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Ans: r = 3%
�
Check:
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