SOLUTION: If P dollars are deposited at an interest rate r and compounded n times, the future value An can be found by the formula An=P(1=r)^n. Find the rate of interest if a principal amoun

Algebra ->  Quadratic Equations and Parabolas  -> Quadratic Equations Lessons  -> Quadratic Equation Lesson -> SOLUTION: If P dollars are deposited at an interest rate r and compounded n times, the future value An can be found by the formula An=P(1=r)^n. Find the rate of interest if a principal amoun      Log On


   

Question 426672: If P dollars are deposited at an interest rate r and compounded n times, the future value An can be found by the formula An=P(1=r)^n. Find the rate of interest if a principal amount of $5000 grows to $6050 in 2 years if interest is compunded annually?
Answer key has 10% as the answer but doesn't explain the process of solving the equation.
Answer by htmentor(1343) About Me  (Show Source):
You can put this solution on YOUR website!
A+=+P%281+%2B+r%29%5En
We are given A = $6050, P = $5000, and n = 2 yrs
So we have 6050+=+5000%281+%2B+r%29%5E2
Divide by 5000, and take the square root of both sides:
1.1 = 1 + r -> r = 0.1, or 10% annual interest rate