To find the interest rate of the account, we can use the formula for compound interest:
A = P(1 + r)^t
Where:
A = the amount of money after t years
P = the principal amount (initial investment)
r = the annual interest rate
t = the number of years
Given:
P = $15,000.00
A = $16,099.44
t = 2 years
We can substitute these values into the formula and solve for r:
$16,099.44 = $15,000.00(1 + r)^2
$16,099.44 = $15,000.00(1 + r)(1 + r)
$16,099.44 = $15,000.00(1 + r)^2
$16,099.44/$15,000.00 = (1 + r)^2
1.073296 = (1 + r)^2
√1.073296 = 1 + r
1.03659 = 1 + r
r = 1.03659 - 1
r = 0.03659
So, the annual interest rate of the account is 3.659%.
This is closest to option 3: 3.6%
A company invests $15,000.00 in an account that compounds interest annually. After two years, the account is worth $16,099.44. Use the function, where r is the annual interest rate, P is the principal, and A is the amount of money after t years. What is the interest rate of the account?
1.04%
3.6%
5.4%
7.3%
1 answer