Question 54800
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Let x be the annual interest rate (which is/(or MUST be) under the question).


    Let me underline and highlight it: the question is/(or MUST be) about the annual interest rate, 
    not about the 4-years time period interest rate, otherwise the problem loses its educational value).


Then the equation is


{{{5000*(1+x)^4}}} = 5400  ====>


{{{(1+x)^4}}} = {{{5400/5000}}} = 1.08   (it is where the other tutor took his 8%)

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1 + x = {{{root(4,1.08)}}} = 1.019  ====>


x = 1.9%.


<U>Answer</U>.  Annual interest rate was 1.9%.


<U>Check</U>.   {{{5000*(1+0.19)^4}}} = 5390,  and the difference is due to rounding.
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