How do I find an interest rate using the formula a=p(1+r)^t?

1 Answer
Sep 15, 2014

To find the interest rate (r) in the formula a=p(1+r)^t, you need to know the values of a (amount), p (principal) and t (time). You would take a and divide it by p. You will then take that result and take the t root of it. You then subtract that answer by 1 to get your interest rate in decimal form.

Here is an example:

You need to find the interest rate of an account that grew from $4000 to $4063 in 2 years.

a = 4063

p = 4000

t = 2

4063 = 4000 (1 + r)^2

4063/4000=(1 +r)^2

1.01575 = (1 +r)^2

sqrt1.01575=sqrt((1 +r)^2)

1.007844 = 1 + r

1.007844 - 1 = r

.007844 = r

interest rate rounds to .784 %