Question

When Angela turned 10, her parents deposited $5,000 in a college fund for her. When Angela enrolled in college at 18, her account had $6,800 to help pay her expenses. If the account paid simple interest, what was the annual interest rate?

Answer 1

Answer:

The annual interest rate was 4.5% in Angela's college fund.

Step-by-step explanation:

1. Let's review the data given to us for solving the question:

Investment when Angela was 10= US$ 5,000

Duration of the investment = 8 years

Balance of the account when Angela turned 18 = US$ 6,800

2. Let's find the annual interest rate of this investment after 8 years or 20 quarters, using the following formula:

FV = PV * (1 + r) ⁿ

PV = Investment when Angela turned 10 = US$ 5,000

FV = Balance of the account when Angela turned 18 = US$ 6,800

number of periods (n) = 8

Replacing with the real values, we have:

6,800 = 5,000 * (1 + r) ⁸

6,800/5,000 = (1 + r) ⁸ (Dividing by 5,000 at both sides)

34/25 = 1⁸ + r⁸

34/25 - 1 = r⁸ (1⁸ = 1)

34/25 - 25/25 =r⁸ (1 = 25/25)

9/25 =  r⁸

0.36 = r⁸ (9/25 = 0.36)

⁸√0.36 = ⁸√r⁸

0.045 = r

r = 4.5%

The annual interest rate was 4.5% in Angela's college fund.

Answer 2

Answer:

The answer is 4.5

Step-by-step explanation:.

To determine the interest rate, substitute the numbers for the values in the I equals Prt formula. I equals one thousand eight hundred, P equals five thousand and t equals eight because the money was in the bank for eight years.

Multiply five thousand by eight.

Divide both sides by forty thousand and evaluate.

Finally, convert the decimal zero point zero four five to four point five percent.