# How do you use the formula to solve these problems: Initial deposit of $300, for 2 years and final value is$500?

Jan 4, 2016

Here is the formula assuming annual compound interest ...

#### Explanation:

$300 {\left(1 + i\right)}^{2} = 500$

${\left(1 + i\right)}^{2} = \frac{500}{300} = \frac{5}{3}$

Now take the square root of both sides ...

$\sqrt{{\left(1 + i\right)}^{2}} = \sqrt{\frac{5}{3}}$

$1 + i = \sqrt{\frac{5}{3}} \approx 1.29$

$i \approx 1.29 - 1 = 0.29$ or 29%

So, the annual interest rate is ~~29%

Hope that helps