Maths
posted by Lilly on .
What simple interest rate is equivalent to a compound interest rate of 6% p.a. over 10 years correct to two decimal places?

Let's compare the value of $1 at the end of 10 years at both types of interest:
compound: Value = 1(1.06)^10
simple: let the rate be r
interest = 1(10)(r) = 10r
value = 1 + 10r
so 1 + 10r = 1.06^10
10r = 1.790847...  1
r = .0790847...
rate = 7.91% to 2 decimals