Question

Tim Invested $5,000 in a savings account for 6 years.He earned $550 over that fine period.What is the interest rate?

Answer 1

Answer:

1.75 %  

Step-by-step explanation:

The formula for the future value (FV) of an investment is

FV =PV(1 + r/n)^nt

If the interest is calculated once a year, n = 1, and the formula reduces to

     FV = PV(1 +r)^t

5550 = 5000(1 + r)⁶     Divide both sides by 5000

 1.110 = (1+r)^6              Take the sixth root of each side

 1 + r = 1.0175               Subtract 1 from each side

      r = 0.0175               Convert to percent

     r = 1.75 %

The interest rate is 1.75 %.