SOLUTION: In 2 years, an investment of $10,000 grows to $11,449. Use the compound interest formula A = P(1 + r)t , where P is principal in dollar and A is the amount after t y

Algebra ->  Finance -> SOLUTION: In 2 years, an investment of $10,000 grows to $11,449. Use the compound interest formula A = P(1 + r)t , where P is principal in dollar and A is the amount after t y      Log On


   

Question 1139631: In 2 years, an investment of $10,000 grows to $11,449. Use the compound interest formula A = P(1 + r)t
, where P is
principal in dollar and A is the amount after t years, to find the annual interest rate, r.
Answer by ikleyn(52794) About Me  (Show Source):
You can put this solution on YOUR website!
.

The formula   A = P(1+r)t  in your post is  WRONG  and  INCORRECT.

No one bank and no one account works according to this formula.

The correct formula is   A = P%2A%281%2Br%29%5Et,   and then 

    11449 = 10000%2A%281%2Br%29%5E2,


    11449%2F10000 = %281%2Br%29%5E2


    1.1449 = %281%2Br%29%5E2


    1 + r = sqrt%281.1449%29


    1 + r = 1.07


    r = 1.07 -1 = 0.07 = 7%.        ANSWER