Question

Sally invests $4000 in a savings account which compounds interest monthly. After 10 years, she has a balance of $5,451.52. What is the annual interest rate of the account, rounded to the nearest 0.01%?

Answer 1

Here is the formula to find annual interest rate\[I = P r t\]

Answer 2

Here is the compound interest formula: \[\Large A = P(1 + \frac{ r }{ n })^{nt}\]
A = Amount at maturity = $5,451.52
P = Principal Amount = $4,000
r = Annual interest rate in decimal
n = compounding period = 12 (because compounded monthly means 12 times a year)
t = years invested = 10

Substitute and solve for r.

Answer 3

@ranga Okay that's what I had! I just wasn't sure if I was doing it right thanks!

Answer 4

cool. you are welcome.