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Your accountant tells you that if you can continue to earn the current interest rate on your balance of $800 for the next two years you will have $898.88 in your account. If your accountant is correct, then what is the current interest rate?

Respuesta :

thaovtp1407

Answer:

The current interest rate is 6%

Explanation:

Given that:

  • Balance: $800
  • Future value: $898.88
  • n= 2 years

We have formula for future value as below:

FV = PV[tex](1+r)^{n}[/tex]

<=> [tex](1+r)^{n}[/tex] = [tex]\frac{FV}{PV}[/tex]

<=> [tex](1+r)^{2}[/tex] = [tex]\frac{898.88}{800}[/tex]

<=> [tex](1+r)^{n}[/tex] = 1.1236

<=> 1+ r = [tex]\sqrt{1.1236}[/tex] = 1.06

<=> r = 1.06 -1 = 6%

So the current interest rate is 6%

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