Question

Nicholas hopes to earn $600 in interest in 3.1 years time from $60,000 that he has available to invest. To decide if it's feasible to do this by investing in an account that compounds annually, he needs to determine the annual interest rate such an account would have to offer for him to meet his goal. What would the annual rate of interest have to be? Round to two decimal places.

Answer 1

Answer:0.321 %

Step-by-step explanation:

Given

Interest is  $ 600

Principal $P=\ 60,000$

time $t=3.1 yr$

$A=P(1+\frac{r}{100})^t$

where A=amount

r=rate of interest

and A-P=interest

$P(1+r)^t-P=600$

$P\left [ \left ( 1+r\right )^{3.1}-1\right ]=600$

$60,000\cdot \left [ \left ( 1+r\right )^{3.1}-1\right ]=600$

$\left ( 1+r\right )^{3.1}-1=0.01$

$\left ( 1+r\right )^{3.1}=1.01$

$r=1.00321414-1$

$r=0.00321$

therefore r=0.321 %