The formula for computing compound interest for a principal P that is invested at an annual rate r and compounded annually is gi
ven by A = P(1 + r)n , where A is the accumulated amount in the account after n years. Let’s try a different approach. Substitute the value of 2 for n and solve this formula for r. Verify that you get the following result:
r = PA −1 (Hint: First solve for (1 + r)2 and then take the square root of both sides of the equation.) Notice that you now have a radical expression to work with. Substitute
$5000 for P and $5600 for A (which is the principal plus $600 in interest) to see what your rate must be. Round your answer to the nearest percent.
