Problema Solution
Ben Franklin's gift of 7,000 to new York city grew to 9,000,000 in 200 years. At what interest rate compounded annually would this growth occur?
Answer provided by our tutors
Let
A = $9,000,000 the future value after 200 year
P = $7,000 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 as a decimal
A = P(1 + r)^n
7000(1 + r)^200 = 9000000
........
........
r = 0.0364 or 3.64%
The interest rate is 3.64%.