Answer:
3%
Step-by-step explanation:
He starts off with 5000 and ends up with 5800. To summarise:
Year 0: 5000
Year 1: ?
Year 2: ?
Year 3: ?
Year 4: ?
Year 5: 5800
As it is compound interest, we know that the value at the end of the past year is being multiplied by a certain number each year, which is the interest rate.
Therefore, we are multiplying by 'x' each year.
So: 5000 x [tex]x\\[/tex] x [tex]x\\[/tex] x [tex]x\\[/tex] x [tex]x\\[/tex] x [tex]x\\[/tex] = 5800
overall: 5000[tex]x^5[/tex] = 5800
we can now solve this equation:
divide by 5000: [tex]x^5[/tex] = [tex]\frac{29}{25}[/tex]
5th root: x = 1.03012....
Therefore the value is being multiplied by 1.03 each year, which is an increase of 3%
I hope this helps, feel free to ask if you have any questions :)
