You can put this solution on YOUR website! Abel invested $8,500 in a program that compounded monthly and after 5 years he had $12,500.
What was the approximate interest rate?
:
the compound interest formula: A = p[1 + (r/n)]^nt, where:
A = accumlated amt after t yrs
p = initial amt (t=0)
r = interest rate in decimal form
n = no. of times paid per year
:
This problem
8500[1 + (r/12)]^(12*5) = 12500
[1 + (r/12)]^60 = 12500/8500
[1 + (r/12)]^60 = 1.470588
using nat logs
60*ln(1+(r/12)] = ln(1.47088)
60*ln(1+(r/12)] = .38566
ln(1+(r/12)] = .38566/60
ln(1+(r/12)] = .0064277
find the antilog of both sides
1 + (r/12) = 1.00644841
subtract 1 from both sides
r/12 = .00644841
multiply both sides by 12
r = .0774
Interest rate 7.74%
