Compound interest: Find rate for $15,256.80 w/ future value of $25K in 5 years

James101

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Jun 18, 2018
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I can’t freaking work this out. I’m new to compound interest, so I’m still clueless. What is the rate of interest when the Principle is $15,256.80, the future value is $25,000 in 5 years, and the interest is compounded quarterly? And what would the formula be to work out the rate of interest in layman’s terms?
 

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The general formula for the future value of an investment subjected to compound interest is given by:

\(\displaystyle F = P \left( 1 + \dfrac{r}{n} \right)^{nt}\)

where F is the future value, P is the principal, r is the interest rate, n is the number of compounding periods per year, and t is the number of years. The problem text gives us most of these values, so let's plug in what we know:

\(\displaystyle 25000 = 15256.80 \left( 1 + \dfrac{r}{4} \right)^{4 \cdot 5}\)

That shouldn't be too bad to solve for r. Give it a go and see what you come up with.
 
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