# Johnny invests $2,745 into an account, which has been earning interest for many years and he now has a total of $39,974. In two sentences explain why a negative number would be reasonable in the solution of the rate he received on his investment?

##### 1 Answer

Jun 22, 2018

The "effective" annual interest rate may need to be reported.

Rearranging the formula for compound interest to find the effective interest rate would invoke a "negative" number in the equation.

#### Explanation:

Rearranging the formula for compound interest to find the effective interest rate would invoke a "negative" number in the equation.

So, if the time lapse was 30 years, the rate would have been: