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Question

# To make CDs look more attractive than they really are, some banks advertise that their rates are higher than their competitors’ rates; however, the fine print says that the rate is a simple interest rate. If a person deposits $10,000 at 10% per year simple interest, what compound interest rate would yield the same amount of money in 3 years? Solution Verified Answered 2 years ago Answered 2 years ago Step 1 1 of 3 First we need to calculate future amount using simple interest after 3 years at a interest rate of 10%. text${\text{\P}}$ =$10,000

text${\text{\i}}$ = 10%

n = 3

F = P + Pni

F = $10,000 +$10,000(3)(0.1)

F = 13,000

Now, we use compound interest formula as follows, while givens are:

Total due after n years = $13,000 text${\text{\P}}$ =$10,000

n = 3

text${\text{\i}}$ = ?

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