story problem

Question

The formula a=p(1+r)^2 gives the amount A is dollars that P dollars wil grow to in 2 years at interest rate R (where r is given as a decimal), using compound interest. What interest rate will cause $4000 to grow to $4452.10 in 2 years??

Answer 1

the formula you have is for compounding annually....so I will assume you are asking for the interest rate necessary for 4000 to grow to 4452.1 in 2 years compounding two times over the 2 years, thus using the formula you provided.

 

a=4452.1 and p=4000, so

 

4452.1/4000 = (1+r)^2

 

and 1+r = \sqrt(4452.1/4000)

 

so r = \sqrt{4452.1/4000) - 1