sum of $1000 was invested for 4 years, and the interest was compounded semiannually. If this sum amounted to $1389.08 in the given time, what was the interest rate? Please round your answer to two decimal places.

Question

anonymous · Answer

Formula = P(1+R/N)^NT
P = principle (how much you start out with)
R = Interest Rate
N = Number of times compounded a year 
T = Number of years
1000(1+R/2)^8 = 1389.08
divide by 1000
(1+R/2)^8 = 1.38908
take the eighth root of both sides
1+R/2 = 1.041936
subtract 1 then multiply by 2
R = .0839 or 8.39%