One thousand dollars invested grew to be $3,000 six years hence. If the interest was compounded yearly, the interest rate on this investment was 20%.

Question

Quizplus · Accepted Answer

The interest rate can be calculated using the formula A = P(1 + r/n)^(nt), where A is the final amount, P is the principal, r is the interest rate, n is the number of times per year that the interest is compounded, and t is the number of years. In this case, A = $3,000, P = $1,000, n = 1 (since the interest is compounded yearly), and t = 6. Substituting these values into the formula, we get:$3,000 = $1,000(1 + r/1)^(1*6)$3,000 = $1,000(1 + r)^6Dividing both sides by $1,000, we get:3 = (1 + r)^6Taking the sixth root of both sides, we get:1.1547 = 1 + rSubtracting 1 from both sides, we get:0.1547 = rMultiplying by 100, we get:15.47% = rTherefore, the interest rate on this investment was 15.47%, not 20%.

One Thousand Dollars Invested Grew to Be $3,000 Six Years