What is the interest rate? (Word Problem)
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# What is the interest rate? (Word Problem)

[From: ] [author: ] [Date: 11-05-20] [Hit: ]
Help!-You want \$2000 to grow into \$2226.Thus, your initial amount, P, will be \$2000.......
The formula A=P (1+r)^2 gives the amount A in dollars that P dollars will grow to in 2 years at interest rate r (where r is given as a decimal), using compound interest. What interest rate will cause \$2000 to grow to \$2226.05 in 2 years?
The interest rate is ?%
Wow I don't even know where to start! Help!

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You want \$2000 to grow into \$2226.05

Thus, your initial amount, P, will be \$2000.
Your final amount after 2 years, A, will be \$2226.05

We have:
2226.05 = 2000(1 + r)^2
(1 + r)^2 = 2226.05 / 2000
1 + r = sqrt(1.113025)
r = 1.055 - 1
r = 0.055

Thus, we have an interest rate of 0.055
In terms of percentage, this will be 5.5%
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