00:02
Okay, here we have a compound interest problem, and we're told that the money is compounded annually, and so we know it's non -continuous, so this is the formula we use.
00:12
We're told that the amount of money deposited is $5 ,000, so that's what we call the principal p, and we're also told that it grows to $7 ,000 in five years.
00:25
So the final amount is what we call a, and the time is five, so that would be t.
00:31
We also know that it compounds once per year.
00:34
Annual compounding.
00:36
So that means n is 1.
00:38
And our job is to find r the interest rate.
00:41
So let's go ahead and substitute all the numbers into the equation.
00:44
We have 7 ,000 equals 5 ,000 times 1 plus r over 1 to the 1 times 5.
00:55
Now let's simplify that a little bit.
00:57
So that would be 7 ,000 equals 5 ,000 times 1 plus r to the 5th.
01:04
Okay, this is not an exponential equation because our variable is not in the exponent.
01:11
So we do not have to use logarithms on this.
01:14
First thing we're going to do is divide both sides of the equation by 5 ,000...