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RRSP problem Plz help me

  1. Mar 18, 2005 #1
    RRSP problem Plz help me !!

    Stacey bought a $1000 RRSP today. After one year she will add $2500. By the end of the second year, the money will be grown to $3851 as it earned interest over time. What was the interest rate?

    a)Apply the compound interest formula to both $1000 and $2500 investments. Assume that interest is compounded annually at the rate i, to grow to $3851 to get:

    [tex]1000(1+i)^2 +2500(1+i)=3851 [/tex]

    I dont have to do anything in this part right there is nothing they have already applied the compound interest formula to both $1000 and $2500

    b)If this equation is written as [tex]1000x^2 +2500x -3851=0 [tex] what does x represent?
    I think it represents the interest plus 1 is this correct? Is there a better way to answer this question

    c)Use the quadratic formula and your calculator to solve for x and i.

    Ok I will use the quadratic formula to solve for x and I will get two values then I will subtract make x=(1+i)^2 and solve for i there will be two interest rates and two values for x is this correct? The amount I will get for i will it be in percent ?

    d)There are two solutions to the quadratic equation . Which one would you choose? Why?
    The positive one because interest can't be negative, im not too sure.
     
    Last edited: Mar 18, 2005
  2. jcsd
  3. Mar 18, 2005 #2

    shmoe

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    x=1+i, no square on the right side. What value do you get for i? Does it look like a percent?


    Why the doubt? Would 1+i being negative many any sense at all?
     
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