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Popular Word Problems >

put 10, 000.00 into an account which earns interest compounded quarterly. After 2 years, she withdrew the entire balance of 10, 274.00 . What was the interest rate on the account?

Solution

p u t 10, 000.00 in t o an a cco u n t w hi c h e a r n s in t eres t co m p o u n d e d q u a r t er l y . A f t er 2 ye a rs, s h e w i t h d re w t h e e n t i re ba l an ce o f 10, 274.00 . Wha t w a s t h e in t eres t r a t e o n t h e a cco u n t ?

Solution

Rate : 1.35385 \dots %

Solution steps

Translate the problem into an equation:

10274 = 10000 (1 + \frac{r}{4})^{4 \cdot 2}

Solve for

r, 10274 = 10000 (1 + \frac{r}{4})^{4 \cdot 2} : r = 1.35385 \dots %

Rate : 1.35385 \dots %

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