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If 25,000 is deposited in an account that earns interest compounded monthly becomes 32,000 after two years, what is the interest rate?

Solution

If 25, 000 is deposited in an account that earns interest compounded monthly becomes 32, 000 after two years, what is the interest rate?

Solution

Rate : 12.40670 \dots %

Solution steps

Translate the problem into an equation:

32000 = 25000 (1 + \frac{r}{12})^{12 \cdot 2}

Solve for

r, 32000 = 25000 (1 + \frac{r}{12})^{12 \cdot 2} : r = 12.40670 \dots %

Rate : 12.40670 \dots %

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