Question

Please walk me through this, I'm not sure how to do this one. :/

@jim_thompson5910

Answer 1

We're using compound interest, but not continuously compounded interest since it only compounds 2 times per month, ie 2*12 = 24 times per year

Answer 2

so we'll need this formula

A = P*(1+r/n)^(n*t)

Answer 3

A = final balance
P = initial balance (aka principal)
r = interest rate
n = compounding frequency
t = time in years

Answer 4

so in this case,

A = 2134.96
P = 1327.35
r = unknown (we're solving for this)
n = 2*12 = 24
t = 12

Answer 5

plug those values in and solve for r

A = P*(1+r/n)^(n*t)

2134.96 = 1327.35*(1+r/24)^(24*12)

r = ??

Answer 6

r= 1.00 ? That's what I got.
@jim_thompson5910

Answer 7

r = 1 implies you have a 100% interest rate

Answer 8

which is just beyond crazy

Answer 9

one sec and I'll write out how to solve for r

Answer 10

I solved for "r" and that's what the calculator gave me.
It was more like 1.00165 ...., but still. :/

~Alright, thanks! That'd be great! :DD

Answer 11

A = P*(1+r/n)^(n*t)

2134.96 = 1327.35*(1+r/24)^(24*12)

2134.96/1327.35 = (1+r/24)^(24*12)

1.60843786 = (1+r/24)^(288)

(1.60843786)^(1/288) = 1+r/24

1.00165158 = 1+r/24

1.00165158-1 = r/24

0.00165158 = r/24

r/24 = 0.00165158

r = 24*0.00165158

r = 0.03963792


So the interest rate is around 3.96% which rounds to 4%


Usually, most interest rates are less than 10%. The higher interest rates like 20% or 30% (or sometimes even 40%) are for very risky things like credit cards.

Answer 12

0.3% is NOT the same as 3%

Answer 13

I think that's where the mixup is

Answer 14

it's 4.0% since that's the same as 4%

Answer 15

Right; oh, I see the mixup. Thank you!!