Find the required annual interest rate, to the nearest tenth of a percent, for $1200 to grow to $1500 if interest is compounded monthly for 6 years.
A) 7.4%
B) 0.3%
C) 2.5%
D) 3.7%

Question

Quizplus · Accepted Answer

To find the annual interest rate, we use the formula for compound interest: $ A = P(1 + \frac{r}{n})^{nt} $. Here, $ A = 1500 $, $ P = 1200 $, $ n = 12 $ (monthly), and $ t = 6 $. Solving for $ r $, we get $ r \approx 0.037 $ or 3.7% when rounded to the nearest tenth.

Find the Required Annual Interest Rate, to the Nearest Tenth