Question

$500 was deposited in an account that is compounded yearly. The money

tripled in 12 years. What is the implicit annual interest rate in percent to two
decimal places?

Answer 1

Annual interest rate = 9.58% (Approx.)

Explanation:

Given:

Amount deposit in bank = $500

Number of ear money tripled = 12 year

Find:

Annual interest rate

Computation:

Future amount = 3 x Amount deposit in bank

Future amount = 3 x 500

Future amount = $1,500

A = P[1+r]ⁿ

1,500 = 500[1+r]¹²

1500 / 500 = [1+r]¹²

3 = [1+r]¹²

1.0958 = 1 + r

r = 1.0958 - 1

r = 0.0958

Annual interest rate = 9.58% (Approx.)