Question

Asked Feb 11, 2019

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Suppose you deposit $ 1296 today and your account will accumulate to $ 5637 in 9 years. What is the rate of interest? Input your answer in decimals, not percentages. Round your answer to four decimals places.

Step 1

Maturity Amount, A = $ 5637

Principal deposited, P = $ 1,296

Time period, T = 9 years

Step 2

Let's say interest rate per annum is R.

Then the maturity amount will be given by the compound interest formula:

A = P x (1 + R)^{T}

Step 3

Thus, $ 5,637 = $ 1,296 x ( 1 + R)9

Hence, R = (5,637 / 1,296)(1/9) - 1 = 0.1774...

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