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Carolyn invested 500, compounded quarterly, for 2 years. At what interest rate will she need to invest if she wants 552.25 at the end of the term?

Solution

Carolyn invested 500, compounded quarterly, for 2 years. At what interest rate will she need to invest if she wants 552.25 at the end of the term?

Solution

Rate : 5.00063 \dots %

Solution steps

Translate the problem into an equation:

552.25 = 500 (1 + \frac{r}{4})^{4 \cdot 2}

Solve for

r, 552.25 = 500 (1 + \frac{r}{4})^{4 \cdot 2} : r = 5.00063 \dots %

Rate : 5.00063 \dots %

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