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24 August, 09:51

Pei's savings account balance is $12,000 today. Pei opened the account exactly 7 years ago with a $10,000 deposit. Pei has made no other deposits or withdrawals. What annual interest rate (compounded annually) has the account earned?

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  1. 24 August, 09:56
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    2.64%

    Explanation:

    A = P (1 + r) ^n

    A = $12,000

    P = $10,000

    n = 7 years

    12,000 = 10,000 (1 + r) ^7

    (1 + r) ^7 = 12,000/10,000 = 1.2

    (1 + r) ^7 = 1.2

    1 + r = (1.2) ^1/7

    I + r = 1.0264

    r = 1.0264 - 1 = 0.0264

    r = 0.0264 * 100 = 2.64%
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