Question

Diane initially deposited $12,500 into a money market account and made no additional deposits or withdrawals. When she closed the account in exactly one year, its value had grown to $12,985. Calculate the annual growth rate for the money market account. Round your answer to two places after the decimal.

Answer 1

Answer:

The annual growth rate is 3.88%

Explanation:

The annual growth can be computed using the below formula:

(closing account balance-initial deposit)/initial deposit*100

closing account balance is $12,985

initial deposit is $12,500

annual growth rate=($12,985-$12,500)/$12,500*100

                                =$485/$12,500*100

                                 =3.88%

The annual growth rate for the money market account is 3.88% as computed above,which implies that the account would double the initial investment in 18.04 years using the 70 rule(70/3.88)

Answer 2

Answer: 3.88% (2dp)

Explanation:

The growth rate is calculated by subtracting the old figure from the new figure and dividing by the original figure.

This shows us how much the initial figure has grown by.

Calculating therefore would be,

= 12,985 - 12,500 / 12,500

= 0.0388

= 3.88%

3.88% is the annual growth rate for the money market account.