Question

Becky Anderson must pay a lump sum of $6000 in 5 yr. If only $5000 is available to deposit right now, what annual interest rate is necessary for the money to increase to $6000 in 5 yr?

Answer 1

I agree with him so he haves the answer correct

Answer 2

Hello!

Out equation is: $A=P(1+\frac{r}{n} )^t^n$

A= 6000

P=5000

N=1

T=5

R= What we are trying to find

This means we will have $6000=5000(1+r)^5$

Divide both sides by 5000:

$\frac{6000}{5000} = (1+r)^5$

Move the power to the other side by rooting both sides:

$\frac{6000}{5000} ^1^/^5 = 1+r$

Subtract 1 from both sides:

$\frac{6000}{5000} ^1^/^5 -1 = r$

Now we just need to calculate: R = 0.03713728...

I don't know how many decimal places you can have, but I will round to 2. This will give you an Interest Rate of 3.71%.

I hope this helps! :)