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  • 24-05-2005 12:12pm
    #1
    neon_glows
    Closed Accounts Posts: 873 ✭✭✭


    Question:

    What is the rate of interest if €1000 grows to €1800 in 10 years?

    Im guessing this but i dont think its right:

    A = P (1 + r/100)^n

    1800 = 1000 (1 + r/100)^10

    1.8 = (1 + r/100)^10

    10gmail?view=att&disp=thd&attid=0.1&th=1040e9dd1a6834461.8 = 1 + r/100

    13.413 = 1 + r/100

    12.416 = r/100


Comments

  • #2
    incisor71
    Closed Accounts Posts: 281 ✭✭incisor71


    Slight mistake there, going from Line 3 to Line 4 - you need to get the tenth root of BOTH sides, therefore:

    1.8 = (1 + r/100)^10
    => (1.8)^0.1 = 1 + r/100
    =>1.06054 = 1 + r/100
    => r/100 = 0.06054 => r = 6.054%.

    Re-insert this value of r into the original equation if you wish to verify it.


  • #3
    neon_glows
    Closed Accounts Posts: 873 ✭✭✭neon_glows


    thanks a million.


  • #4
    incisor71
    Closed Accounts Posts: 281 ✭✭incisor71


    incisor71 wrote:
    Slight mistake there, going from Line 3 to Line 4 - you need to get the tenth root of BOTH sides, therefore:

    1.8 = (1 + r/100)^10
    => (1.8)^0.1 = 1 + r/100
    =>1.06054 = 1 + r/100
    => r/100 = 0.06054 => r = 6.054%.

    Re-insert this value of r into the original equation if you wish to verify it.

    Small addendum to my previous post - manipulate the original equation in its symbolic form to give you r, and only then insert the numeric values:

    r = 100 ( (A/P)^(1/n) - 1)


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