The formula for computing the amount A of an investment of principal P invested at interest rate r for 1 year and compounded semiannually is A = P(1 + r/2)^2. Approximately what interest rate is necessary for $1,000 to grow to $1,095, in 1 year if the interest is compounded semiannually?
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I already know that:
1095 = 1000(1 + r/2)^2
a)WHAT IS r?
b)WHAT ARE THE OTHER STEPS IN SOLVING?|||This is simple algebra. You are given "1095 = 1000(1 + r/2)^2" and have to solve for r. I won't give you the solution, since it's obviously a homework problem, but as a hint all you need is a calculator that allows you to take square roots.
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