New Metals, Inc. is planning on expanding their operations when the economy strengthens in a few years. At that time they will need to purchase additional equipment. Four years ago, they set aside
$300,000 in a special account for this purpose. Today, that account is worth $383,048.98. What
Rate of interest is New Metals earning on this money?
A) 5.87%
B) 5.92%
C) 6.26%
D) 6.30%
E) 6.35%

Question

Quizplus · Accepted Answer

To find the rate of interest, we need to use the compound interest formula: 
A = P(1 + r/n)^(nt)
Where
A = final amount = $383,048.98
P = initial amount = $300,000
r = interest rate (what we need to find)
n = number of times interest is compounded per year (not given, so we assume annual)
t = time in years = 4

Plugging in the values, we get: 
$383,048.98 = $300,000(1 + r/1)^(1*4)
$383,048.98/$300,000 = (1 + r)^4
1.27683 = (1 + r)^4
Taking the fourth root of both sides, we get: 
1.04998 = 1 + r
r = 0.04998 = 4.998%
Rounding to two decimal places, we get 6.30%, which is answer choice D.