Problema Solution
Ben Franklin's gift of $4,000 to New York City grew to $4,000,000 in 200 years. At what interest rate compounded annually would this growth occur?
Answer provided by our tutors
A = $4,000,000 the future value after 200 year
P = $4,000 is the principal
t = 200 year the number of years
m = 1 the number of compounding periods per year
n = m*t = 1*200 = 200 the number of compounding periods
r= the annual interest rate
A = P(1 + r)^n
4000(1 + r)^200 = 4000000
by solving we find:
r = 0.0351 or 3.51%
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the interest rate is 3.51%.