Find the interest rate needed for an investment of $5,000 to grow to an amount of $7,500 in 3 year(s) if interest is compounded quarterly. Round your answer to two decimal places.

Question

Quizplus · Accepted Answer

We can use the formula A = P(1 + r/n)^(nt) where A is the final amount, P is the principal (starting amount), r is the interest rate, n is the number of times compounded per year, and t is the time in years.

Plugging in the given values, we get:

7500 = 5000(1 + r/4)^(4*3)

Dividing both sides by 5000, we get:

1.5 = (1 + r/4)^12

Taking the 12th root of both sides, we get:

1 + r/4 = 1.0469

Subtracting 1 from both sides and multiplying by 4, we get:

r = 0.1876 or 18.76%

Rounding to two decimal places, we get the answer choice of C.

Find the Interest Rate Needed for an Investment of $5,000