SOLUTION: when P dollars is invested at interest rate i, compounded annually, for t years, the investment grows to A dollars, where P=(1+i)^1 a. find the interest rate i if $6250 grows t

Question 1153305: when P dollars is invested at interest rate i, compounded annually, for t years, the investment grows to A dollars, where P=(1+i)^1
a. find the interest rate i if $6250 grows to $6760 in 2 years.
b.find the interest rate i if $1,000,000 grows to $1,215,506.25 in 4 years.

Answer by Boreal(15235) (Show Source): You can put this solution on YOUR website!
6760=6250(1+i/n)^nt, but n=1 so it is 6250(1+i)^2
divide by 6250 and 1.0816=(1+i)^2
log both sides
0.0341=2 log (1+i)
0.0170=log (1+i)
raise everything to 10 power to remove log
1.04=(1+i)
i=0.04 or 4%
Same approach where 1.21550625=log (1+i)^4
0.0848=4 log (1+i), divide by 4 and raise to 10 power before rounding
1+i=1.05, i=5%

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