At what annual rate would $200.00 grow to $497.60 in five years?
A) 19%
B) 18%
C) 20%
D) 22%

Question

Quizplus · Accepted Answer

The formula to calculate compound interest is A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount, r is the annual interest rate (decimal), n is the number of times that interest is compounded per year, and t is the time the money is invested for in years. In this case, we are looking for the annual rate (r) that would grow $200 to $497.60 in 5 years. Rearranging the formula to solve for r, and assuming the interest is compounded once a year (n=1), we get r = [(A/P)^(1/t)] - 1. Plugging in the numbers: r = [(497.60/200)^(1/5)] - 1 ≈ 0.20, or 20%.

At What Annual Rate Would $200