Is there a better way to answer this question?
Matt is planning to buy a car in three years. He wants to invest $5000 now and hopes to have $6000 to spend on the car when he buys it. What kind of interest rate would he need if his investment is compounded monthly?
A solution to this problem would be:
I used the formula like so: A=p(1+r/n)^nt
*6000=5000(1+r/12)^12 times 3
*6000=5000(1+r/12)^36
-divide sides by 5000
^1/36(1.2)=((1+r/12)^36)^1/36
1+r/12=1.00508
subtracting both sides by 1
r/12=0.00508
then multiply both sides by 12
r=approx 0.061 or 6.1%
is there a better way to solve this question?
Matt is planning to buy a car in three years. He wants to invest $5000 now and hopes to have $6000 to spend on the car when he buys it. What kind of interest rate would he need if his investment is compounded monthly?
A solution to this problem would be:
I used the formula like so: A=p(1+r/n)^nt
*6000=5000(1+r/12)^12 times 3
*6000=5000(1+r/12)^36
-divide sides by 5000
^1/36(1.2)=((1+r/12)^36)^1/36
1+r/12=1.00508
subtracting both sides by 1
r/12=0.00508
then multiply both sides by 12
r=approx 0.061 or 6.1%
is there a better way to solve this question?
