Alan saved $50,000 for 10 tens years. He earned $25,000 interest from his savings account. what was his bank interest rate:
A. 20% B. 200% C. 5% D. 0.05%

Question

Alan saved $50,000 for 10 tens years. He earned $25,000 interest from his savings account. what was his bank interest rate: 
A. 20% B. 200% C. 5% D. 0.05%

anonymous · Answer

HELP

anonymous · Answer

is this simple or compound interest?

anonymous · Answer

I'm not sure it doesn't say....

anonymous · Answer

I'll assume it's compound. :)

When the interest is compounded once a year:

A = P(1 + r)n

Where:
P is the principal (the initial amount you borrow or deposit)
r is the annual rate of interest (percentage)
n is the number of years the amount is deposited or borrowed for.
A is the amount of money accumulated after n years, including interest.

So...

(50000+25000)=50000(1+r)^10
75000=50000(1+r)^10
1.5 = (1+r)^10
(1.5)^(1/10)=1+r

Solving for r, we get r=0.041379...

so the rate is roughly 4.14% :)

anonymous · Answer

Ok thanks