Question

(i) Find i in terms of P and A.

(ii) If 2500 is invested 3 years ago has a present value of 2650, find the rate of interest, i (correct to one decimal place)

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Answer 1

Answer:

• See below

Step-by-step explanation:

Given formula:

• $A=P(1+i/100)^3$

(i)

Solve for i:

• $A/P=(1+i/100)^3$
• $\sqrt[3]{A/P}=1+i/100$
• $\sqrt[3]{A/P} -1=i/100$
• $i=100(\sqrt[3]{A/P} -1)$

(ii)

P = 2500, A = 2650, find i:

• $i =100(\sqrt[3]{2650/2500} -1)$
• i ≈ 2.0%