word problem

Question

Alba wants to invest $4,500 in a savings account that pays interest compounded annually. Use the basic formula for compound interest to answer the following questions.
(a) Write a formula for the balance, A, in her account after 2 years as a function of the interest rate r

 

(b) How much money will Alba have in her account if the interest rate was 3.5%? Round your answer to 1 decimal place.

 

(c) If Alba wants to have $5,500 in her account after 2 years, what would the interest rate r need to be? Round your answer to 1 decimal place.

Answer 1

A = P(1+r)^t is the base formula

 

(a)  A = 4500(1+r)²

 

(b)  A = 4500(1.035)² = 4820.5

 

(c)  5500 = 4500(1+r)²

 

r = 10.6%