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Popular Word Problems >

If 25,000 is deposited in an account that earns interest compounded monthly becomes 32,000 after two years, what is the interest rate?

Solution

I f 25, 000 i s d e p os i t e d in an a cco u n t t ha t e a r n s in t eres t co m p o u n d e d m o n t h l y b eco m es 32, 000 a f t er tw o ye a rs, w ha t i s t h e in t eres t r a t e ?

Solution

Rate : 12.40670 \dots %

Solution steps

Translate the problem into an equation:

32000 = 25000 (1 + \frac{r}{12})^{12 \cdot 2}

Solve for

r, 32000 = 25000 (1 + \frac{r}{12})^{12 \cdot 2} : r = 12.40670 \dots %

Rate : 12.40670 \dots %

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