Problema Solution
. Mark Schultz deposited $43,200 in the bank on January 1, 2002. On January 2, 2012, this deposit has accumulated to $84,974. Interest is compounded annually on the account. What rate of interest did Mark earn on the deposit?
Answer provided by our tutors
A = $84,974.00 the future value after 10 year
P = $43,200 is the principal
t = 10 year the number of years
m = 1 the number of compounding periods per year
n = m*t = 10*1 = 10 the number of compounding periods
r= the annual interest rate
A = P(1 + r)^n
84974 = 43200(1 + r)^10
43200(1 + r)^10 = 84974
(1 + r)^10 = 84974/43200
by solving we find
r = 0.07 or 7% approximately
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The annual interest rate is 7%.