SOLUTION: A principal of $5000 was invested in a savings account for 4 years. If the interest earned for the period was $400, what was the annual interest rate?

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Question 108305: A principal of $5000 was invested in a savings account for 4 years.
If the interest earned for the period was $400, what was the annual interest rate?

Answer by Fombitz(32388) About Me  (Show Source):
You can put this solution on YOUR website!
I'm assuming compound interest, annually for 4 years.
A=P%281%2Br%29%5Et
Where A is the value at the end of 4 years.
5000%2B400=5000%281%2Br%29%5EtA equals original amount plus interest.
5400=5000%281%2Br%29%5E4Divide both sides by 5000.
1.08=%281%2Br%29%5E4Simplify.
1.0194=1%2BrTake the fourth root of both sides.
r=.0194
The interest rate is 1.94%.