compound formulas

Question

Jerod hopes to earn $1000 in interest in 1.8 years time from $20,000 he has to invest. If compounded semi-annually, determine the annual interest rate needed to meet his goal.

Answer 1

i = p(r/n)^nt

 

1000 = 20000(r/2)^2(1.8)

0.05 = (r/2)^3.6

0.435 ≈ r/2

0.87 ≈ r

 

The rate must be 87% (good luck!).