Interest rate: Trayne Rice 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.)

Question

Quizplus · Accepted Answer

To find the required interest rate, we can use the formula for compound interest:

A = P(1 + r/n)^(nt)

Where:
A = the future value ($5,000 in this case)
P = the principal ($3,000 in this case)
r = the interest rate (what we're trying to find)
n = the number of times interest is compounded per year (since it's not given, we'll assume it's compounded annually)
t = the number of years (3 years in this case)

Plugging in the given values and solving for r, we get:

5,000 = 3,000(1 + r/1)^(1*3)
5/3 = (1 + r)^3
1 + r = (5/3)^(1/3)
r = (5/3)^(1/3) - 1
r ≈ 0.19 or 19% (rounded to the nearest percent)

Therefore, the best choice is A) 19%.

Interest Rate: Trayne Rice Has $3,000 to Invest for Three