Question

Guided Practice

Suppose you have $500 to deposit into an account. Your goal is to have $595 in that account at the end of the second year. The formula r= $\sqrt{A/P}$ - 1 gives the interest rate r that will allow principal P to grow into amount A in two years, if the interest is compounded annually. Use the formula to find the interest rate you would need to meet your goal.



A.

19%



B.

9.1%



C.

8.4%

Answer 1

Answer:

B. 9.1%

Step-by-step explanation:

r= A P −1   = 595 500 −1   ≈0.091 You would need an interest rate of 9.1% to meet your goal.

Answer 2

Answer:

9.1%

Step-by-step explanation:

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