What annual interest rate would cause $150 to grow to $169.10 in 3 years?
a.6.50%
b.8.08%
c.4.08%
d.5.06%
e.4.30%
The annual interest rate that would cause $150 to grow to $169.10 in 3 years is approximately 4.08%. Therefore, the correct answer is option c) 4.08%.
Explanation:
Formula:
Future Value = Present Value × (1 + r)ⁿ
Where:
Future Value = $169.10
Present Value = $150
r is the annual interest rate.
n = Number of years = 3
Plugging in the given values, we get:
$169.10 = $150 × (1 + r)³
Dividing $150 by both sides of the equation yields:
1.1273 = (1 + r)³
Taking the cube root of both sides:
1 + r = 1.1273^(1/3)
Subtracting 1 from both sides:
r = 1.1273^(1/3) - 1
r ≈ 0.0408
We multiply the interest rate by 100 to get the percentage:
r ≈ 4.08%
Therefore, the correct answer is option c) 4.08%.
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