Thread: interest question, please help!

Assuming that interest is compounded annually, what interest rate
would give the same total return after 6 years as Scheme 1?

how would i work this out, would appreciate any help!,

post the entire question please

3. You have £5000 to invest but you have to choose between two different
schemes:
Scheme 1: pays a single payment after 6 years, equivalent to your initial
investment plus 30% of the initial investment.
Scheme 2: pays interest compounded annually at a rate of 4.2% per
annum.
a) Which scheme results in the largest return after 6 years? (6)
b) Assuming that interest is compounded annually, what interest rate
would give the same total return after 6 years as Scheme 1? (6)

the accumulation on sch 1 is:

the accumulation for sch 2 is


you want these to be equal:

solve for i.

Typo SF: 5000

don't want to sound dumb but i cant remember how to work out those equations, any point in the right direction would help alot, cheers guys and thanks for your input so far.

Well, you need to solve this for r (r = rate):
5000(1 + r)^6 = 5000(1.3)
Divide by 5000:
(1 + r)^6 = 1.3
Can you finish it now?
Hint: if a^x = b, then a = b^(1/x)