document.write( "Question 883555: Please help me solve this problem
\n" ); document.write( "P=5,500
\n" ); document.write( "T=3 years
\n" ); document.write( "I=1,200
\n" ); document.write( "What is the interest rate \n" ); document.write( "

Algebra.Com's Answer #533610 by KMST(5328) $\"\"$ $\"About$

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How is the interest compounded?
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\n" ); document.write( "YEARLY COMPOUNDING:
\n" ); document.write( "If you deposit $5,500 and interest is 6.8% compounded yearly,
\n" ); document.write( "you would have $6,700.03 after 3 years.
\n" ); document.write( "Each year, interest would be added amounting to 6.8% of the balance at the start of the year.
\n" ); document.write( "Starting with $ $\"P\"$ , with a rate of $\"r=%226.8+%25%22=0.068\"$ ,
\n" ); document.write( "you would get $\"P%2Ar\"$ added as interest at the end of the year,
\n" ); document.write( "for a total new balance of $\"P%2BP%2Ar=P%281%2Br%29=5500%2A1.068=5874\"$ .
\n" ); document.write( "The next year, the process repeats, but now the whole $ $\"5874=P%281%2Br%29\"$ is earning interest.
\n" ); document.write( "Again, you end the year with $\"%281%2Br%29=1.068\"$ times the starting balance,
\n" ); document.write( "so you end the second year with $\"P%281%2Br%29%5E2=5874%2A1.068=about3273.43\"$ .
\n" ); document.write( "The third year you end up with $\"P%281%2Br%29%5E3=about\"$ $\"3273.43%2A1.068=about6700.02\"$ .
\n" ); document.write( "In general, after 3 years, you have earned a total of $ $\"I\"$ interest, and
\n" ); document.write( " $\"P%2BI=P%2A%281%2Br%29%5E3\"$ , so
\n" ); document.write( " $\"%28P%2BI%29%2FP=%281%2Br%29%5E3\"$ , so in this case
\n" ); document.write( " $\"%285500%2B1200%29%2F5500=6700%2F5500=%281%2Br%29%5E3\"$ ---> $\"1%2Br=root%283%2C6700%2F5500%29=1.068\"$ (rounded).
\n" ); document.write( "So $\"r=1.068-1=0.68=%226.8+%25%22\"$ \n" ); document.write( "

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