Interest rate: Dominic has $3,000 to invest for three years. He wants to receive $5,000 at the end of the three years. What invest rate would his investment have to earn to achieve his goal? (Round to the nearest percent.)
A) 19%
B) 21%
C) 13%
D) 16%

Question

Quizplus · Accepted Answer

To find the interest rate, we use the formula for compound interest: $ A = P(1 + r)^n $. Here, $ A = 5000 $, $ P = 3000 $, and $ n = 3 $. Solving for $ r $, we get $ 5000 = 3000(1 + r)^3 $. Dividing both sides by 3000 gives $ \frac{5}{3} = (1 + r)^3 $. Taking the cube root of both sides, we find $ 1 + r \approx 1.193 $, so $ r \approx 0.193 $ or 19%.

Interest Rate: Dominic Has $3,000 to Invest for Three Years