Question

If P dollars is invested at r percent compounded annually, at the end of 2 yers it will grow to A = P(1+r)^2. At what interest rate will $1,000 grow to $1,210 in 2 years?

Answer 1

Interest rate is `10.0%`

Explanation:

`A=P(1+r)^2 ;A=$1210 , P=$1000`

`1210=1000(1+r)^2 :.(1+r)^2= 1210/1000` or

`(1+r)^2= 1.21:. (1+r) = sqrt 1.21=1.1`

`r=1.1-1=0.1 or 0.1*100=10.0%`

Interest rate is `10.0%` [Ans]