If $1,500 is invested today, the initial investment plus interest will be worth $2,700 in seven years. What is the annual interest rate on the investment?
A) 6.51%
B) 8.05%.
C) 8.76%.
D) 9.12%.
E) 10.43%

Question

Quizplus · Accepted Answer

We can use the formula for compound interest:

$A=P(1+r)^t$

where A is the final amount, P is the principal (initial investment), r is the annual interest rate, and t is the number of years.

Plugging in the given values:

$2700=1500(1+r)^7$

Dividing both sides by 1500:

$1.8=(1+r)^7$

Taking the seventh root:

$1+r=1.0876$

Subtracting 1 from both sides:

$r=0.0876$ or 8.76%

So the answer is C.

If $1,500 Is Invested Today, the Initial Investment Plus Interest