Is it compounded daily, monthly, quarterly, semi-annually, or annually?
The value of r is meaningless without
the compounding frequency. Also, my Eq
uses n instead of t. n is the # of compounding periods.
Use the compound interest formula A=P(1+r)^t and the given information to solve for r.
A=9,000,000
P=80,000
t=40
I have done this problem over a over and still get the wrong answer.
2 answers
A = P(1+r)^t,
Divide both sides by P:
(1+r)^t = A / P,
tLog(1+r) = Log(A/P),
40Log(1+r) = Log(9,000,000/80,000),
40Log(1+r) = Log112.5,
Divide both sides by 40:
Log(1+r) = Log112.5 / 40,
Log(1+r) = 2.0512 / 40,
Log(1+r) = 0.051(1+r),
Exponential form:
(1+r) = 10^(0.0512788),
1+r = 1.1253,
r = 1.1253 - 1 = 0.1253 = 12.53%.
I showed several extra steps; hopefully, you will understand what I did.
Divide both sides by P:
(1+r)^t = A / P,
tLog(1+r) = Log(A/P),
40Log(1+r) = Log(9,000,000/80,000),
40Log(1+r) = Log112.5,
Divide both sides by 40:
Log(1+r) = Log112.5 / 40,
Log(1+r) = 2.0512 / 40,
Log(1+r) = 0.051(1+r),
Exponential form:
(1+r) = 10^(0.0512788),
1+r = 1.1253,
r = 1.1253 - 1 = 0.1253 = 12.53%.
I showed several extra steps; hopefully, you will understand what I did.