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If $3800 is invested in a savings account for which interest is compounded quarterly, and if the $3800 turns into $4300 in 2 years, what is the interest rate of the savings account?

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  1. let the quarterly rate be i

    then 3800(1+i)^8 = 4300
    (1+i)^8 = 1.1315789....
    take (1/8)th root , (exponent of 1/8)

    1+i = 1.01557..
    i = .01557...

    annual rate is 4i = .06229

    the rate is 6.229% per annum, compounded quarterly.

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  2. 4300=3800(1+i/4)^4t where t is 2, solve for i.

    43/38= (1+i/4)^8

    take the log of each side

    log43-log38=8(1+i/4)
    solve for i.

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    bobpursley
  3. I don't get it

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  4. 107.80

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