One year ago, you invested $1,800. Today it is worth $1,924.62. What rate of interest did you earn?

Solution:

Invested amount or the present value = $1,800

Future value = $1,924.62

Number of years (n)= 1

Rate of interest = ?

The annual compound interest can be found using the formula

rate = [Future value/Present Value]^1/n -1

Substituting the known values in the compound interest formula we get

rate = [1924.62/1800] -1

By further calculation

rate = 6.923%

Therefore, the rate of interest is 6.923%

One year ago, you invested $1,800. Today it is worth $1,924.62. What rate of interest did you earn?

Summary:

One year ago, you invested $1,800. Today it is worth $1,924.62. The rate of interest is 6.923%.