+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?
+961 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%.
+961 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%.
