Question

Consider the compound interest equation B(t)=100(1.1664)t.

Assume that n=2, and rewrite B(t) in the form B(t)=P(1+rn)nt.

What is the interest rate, r, written as a percentage?

Answer 1

The formula , for n=1 becomes .

Comparing with , we see that

P=900, and 1+r=1.185, which means that r=0.185.

r=0.185 can be written as 18.5%, as a percentage.

Answer: 18.5%