Question 716005: I need help in finding quarterly interest. The question is: The bank guarantees to triple your money in 10 years if you open an account this month. The interest rate will be compounded quarterly. What is the quarterly interest rate?
Answer by lwsshak3(11628)   (Show Source):
You can put this solution on YOUR website! I need help in finding quarterly interest. The question is: The bank guarantees to triple your money in 10 years if you open an account this month. The interest rate will be compounded quarterly. What is the quarterly interest rate?
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Formula for compound interest: A=P(1+i)^n, P=initial investment, i=interest per period, n=number of periods, A=amount after n-periods.
For given problem:
rewrite formula: A/P=(1+i)^n=3
n=10*4=40 quarterly periods
(1+i)^40=3
take log of both sides
40log(1+i)=log3
log(1+i)=log3/40≈.011928
convert to exponential form:
(1+i)=10^0.011928≈1.0278
i=1.0278-1≈.0278≈2.78%
annual interest rate=4*2.78≈11.12%
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