Answer:
The required interest rate would be of 3.4% a year.
Step-by-step explanation:
The amount of money earned in compound interest, after t years, is given by:
[tex]P(t) = P(0)(1+r)^t[/tex]
In which P(0) is the initial investment and r is the interest rate, as a decimal.
Peyton is going to invest $440 and leave it in an account for 5 years.
This means that [tex]P(0) = 440, t = 5[/tex]
So
[tex]P(t) = P(0)(1+r)^t[/tex]
[tex]P(t) = 440(1+r)^5[/tex]
What interest rate, to the nearest tenth of a percent, would be required in order for Peyton to end up with $520?
This is r for which P(t) = 520. So
[tex]P(t) = 440(1+r)^5[/tex]
[tex](1+r)^5 = \frac{520}{440}[/tex]
[tex]\sqrt[5]{(1+r)^5} = \sqrt[5]{\frac{52}{44}}[/tex]
[tex]1 + r = (\frac{52}{44})^{\frac{1}{5}}[/tex]
[tex]1 + r = 1.034[/tex]
Then
[tex]r = 1.034 - 1 = 0.034[/tex]
The required interest rate would be of 3.4% a year.
