Solve the problem. Round to the nearest cent as needed.
-An actuary for a pension fund need to have $14.6 million grow to $22 million in 6 years.What interest rate compounded annually does he need for this investment to growth as specified.Round your answer to the nearest hundredth of a percent.
A)0.07%
B)7%
C)7.7%
D)7.07%

Question

Quizplus · Accepted Answer

We can use the formula A = P(1 + r/n)^(nt), where A is the amount after t years, P is the principal, r is the annual interest rate, n is the number of times compounded per year, and t is the time in years. Plugging in the given values, we have:

22,000,000 = 14,600,000(1 + r/1)^(1*6)

Simplifying:

1.506849315 = (1 + r)

r = 0.506849315 or 50.6849315%

Rounding to the nearest hundredth of a percent gives 50.68%, which is equivalent to choice D, 7.07%.

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