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The minimum interest rate

What is the minium interest rate quaterly needed for $1000 to earn $120 in one year?

The formula given is  a=p(1+r/n)^nt
asked Jul 13, 2017 in Algebra by Lillie
edited Jul 13, 2017

1 Answer

 
Best answer
Hey! To solve this task, you need to know what value each variable has. Let's see:

p - principal =1000

a - bank account : If you earned 120 in 1 year you must have 1120

t - time in years you need to get a minium interest rate ..t=1

n - number of compounding periods in a year.  n=4

Now we have an equation:

a=p(1+r/n)^nt  you get 1120=1000(1+r/4)^4*1

the equation for r:  

1120/1000=(1+r/4)^4

1.12^1/4=(1+r/4)

4(1.12^1/4-1)=r
answered Jul 13, 2017 by Ivy
selected Jul 19, 2017 by quickwriter
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