We use cookies to personalise content and advertisements and to analyse access to our website. Furthermore, our partners for online advertising receive pseudonymised information about your use of our website. cookie policy and privacy policy.
 
+0  
 
0
380
1
avatar+961 

Ken's parents invest $1,000 in the year 2013 for his college fund. The account is compounded annually.

In 18 years they would like to make another $800 in interest.

What interest rate would be required for this to happen?

 Apr 16, 2015

Best Answer 

 #1
avatar+961 
+5

Interest compounded annually is modeled by the exponential function, A=A0(1+r)t where r is the growth rate, A0 is the initial amount invested, A is the final amount and t is the number of years.

In this problem:

A0=1000t=18A=1800

The equation that models the bank account is:

1800=1000(1+r)18

To solve for r, first divide both sides by 10000.

18001000=(1000(1+r)18)1000

1.8=(1+r)18

You must now take the 18th root of each side.

1.03319=1+r

0.03319=r

After converting the decimal to a percent,the rate is approximately 3.32%.

 Apr 16, 2015
 #1
avatar+961 
+5
Best Answer

Interest compounded annually is modeled by the exponential function, A=A0(1+r)t where r is the growth rate, A0 is the initial amount invested, A is the final amount and t is the number of years.

In this problem:

A0=1000t=18A=1800

The equation that models the bank account is:

1800=1000(1+r)18

To solve for r, first divide both sides by 10000.

18001000=(1000(1+r)18)1000

1.8=(1+r)18

You must now take the 18th root of each side.

1.03319=1+r

0.03319=r

After converting the decimal to a percent,the rate is approximately 3.32%.

shaniab29544 Apr 16, 2015

23 Online Users

avatar
avatar
avatar