Question

the formula A=p(1+r)^2 gives the amount A in dollars that P dollars will grow to in 2 yrs. at interest rate r using compound interest. what interest rate will cause $2,000 to grow to $2,163.20 in 2 yrs.

Answer 1

A=2163.2
p=2000
so we need to solve for the remaining variable, r:
A=p(1+r)^2
(1+r)^2=A/p
\[r=\sqrt{A/p}-1=\sqrt{2163.2/2000}-1=0.04\]
or a 4% interest rate.