Question

Maria deposited $500.00 into a new savings account that earns interest compounded monthly. After 4 years, the balance in the account was $531.00. What was the interest rate on the account?

Answer 1

`500( {1 + (r)/(12)) }^(48) = 531`

`{(1 + (r)/(12) )}^(48) = (531)/(500)`

`1 + (r)/(12) = \sqrt[48]{ (531)/(500) }`

`(r)/(12) = \sqrt[48]{ (531)/(500) } - 1`

`r = 12( \sqrt[48]{ (531)/(500) } - 1) = .015 = 1.5\%`

The interest rate is 1.5% compounded monthly.