Question 1140162: Find the interest rate of an account that has $12500 that will give $450.00 interest in 72 months Found 2 solutions by Theo, ikleyn:Answer by Theo(13342) (Show Source):
f is the future value
p is the present value
r is the interest rate per time period (per month in this problem)
n is the number of time periods (number of months in this problem)
the present value in this problem is equal to 12500.
the future value in this problem is equal to 12500 + 450 = 12950.
n is equal to 72.
r is what you want to find.
the formula becomes:
12950 = 12500 * (1 + r) ^ 72
divide both sides of this equation by 12500 to get:
12950 / 12500 = (1 + r) ^ 72
take the seventy second root of both sides of this equation and subtract 1 from both sides of this equation to get:
(12950 / 12500) ^ (1/72 - 1 = r
solve for r to get:
r = .0004913309946
that's the interest rate per month.
multiply that by 12 to get an annual interest rate of .005895971935.
that's equal to .5895971935%.
that's a little less than 6 tenths of a percent per year.
Since the problem says nothing about if the account is of simple interest or compound, I will assume, by default,
that it is of simple interest.
72 months = 6 years.
Simple interest per year is equal then
i = = 0.6%. ANSWER
