Bytelearn - cat image with glassesAI tutor

Welcome to Bytelearn!

Let’s check out your problem:

An initial investment of $3,000\$3,000 grows to $9,000\$9,000 over a period of 55 years in an account with continuous compounding. What is the annual interest rate? Round your answer to the nearest two decimal places in percentage form. Use the formula A=PertA = Pe^{rt}, where AA is the balance (final amount), PP is the principal (starting amount), ee is the base of natural logarithms (2.71828\approx 2.71828), rr is the interest rate expressed as a decimal, and tt is the time in years.

Full solution

Q. An initial investment of $3,000\$3,000 grows to $9,000\$9,000 over a period of 55 years in an account with continuous compounding. What is the annual interest rate? Round your answer to the nearest two decimal places in percentage form. Use the formula A=PertA = Pe^{rt}, where AA is the balance (final amount), PP is the principal (starting amount), ee is the base of natural logarithms (2.71828\approx 2.71828), rr is the interest rate expressed as a decimal, and tt is the time in years.
  1. Identify Values: Identify the given values: A = 9,000P=9{,}000 P = 33{,}000000 t = 55 \text{ years} Use the formula A = Pe^{rt}.
  2. Rearrange Formula: Rearrange the formula to solve for rr: A=PertA = Pe^{rt} 9000=3000imese5r9000 = 3000 imes e^{5r} Divide both sides by 30003000: 3=e5r3 = e^{5r}
  3. Take Natural Logarithm: Take the natural logarithm (ln\ln) of both sides to solve for rr: ln(3)=ln(e5r)\ln(3) = \ln(e^{5r}) ln(3)=5r\ln(3) = 5r
  4. Simplify Calculation: Simplify using the property of logarithms: ln(3)=5r \ln(3) = 5r r=ln(3)5 r = \frac{\ln(3)}{5}
  5. Calculate r Value: Calculate the value of rr: r = rac{ ext{ln}(3)}{5} ext{≈} rac{0.2197}{5} ext{≈} 0.0732
  6. Convert to Percentage: Convert rr to a percentage: r0.0732×1007.32%r \approx 0.0732 \times 100 \approx 7.32\%

More problems from Compound interest