To make CDs look more attractive as an investment than they really are, some banks advertise that their rates are higher than their competitors’ rates; however, the fine print says that the rate is based on simple interest. If you were to deposit $24,000 at 11% per year simple interest in a CD, what compound interest rate would yield the same amount of money in 3 years? The compound interest rate that would yield the same amount of money in 3 years is % per year.

Respuesta :

Answer:

compound interest rate is 9.97%

Explanation:

given data

deposit amount = $24,000

rate = 11% per year

time = 3 year

to find out

compound interest rate

solution

simple interest = P ( 1+rt)     ...............1

simple interest = 24000  ( 1+ 0.11 ×3 )

simple interest = $31920

so

compound interest rate is

amount = P ( [tex](1+r)^t[/tex] )      ................2

31920  = 24000  ( [tex](1+r)^3[/tex] )

1.33 =  [tex](1+r)^3[/tex]

r = 0.09972 = 9.97 %

so compound interest rate is 9.97%