An account earns 10% annual compound interest. The amount in the account after t years is equal to the principal times the expression (1 + 0.10) t, or 1.10t. To the nearest tenth of a percent, what is the monthly compound interest rate?

Question

Jose Gross

Mathematics

10 May, 11:20

An account earns 10% annual compound interest. The amount in the account after t years is equal to the principal times the expression (1 + 0.10) t, or 1.10t. To the nearest tenth of a percent, what is the monthly compound interest rate?

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Grayson Schneider · Answer 1

Assuming that means 1.10^t:

0.10 is for years. To get months divide by 12.

0.10/12 = 0.0083333 ...

And (1+0.083333 ...) = 1.0833333. (You will have to multiply t by 12 also to get it in terms of months)

(1.0833333) ^12t