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Answer :
Assuming the interest is compounded monthly, the interest rate that would be required in order for Joshua to end up with $1,500 is 2.26%.
How to calculate the interest rate?
Mathematically, compound interest can be calculated by using this formula:
A(t) = P(1 + r/n)^{nt}
Where:
- A represents the future value.
- n represents the number of times compounded.
- P represents the principal.
- r represents the interest rate.
- T represents the time measured in years.
Substituting the given parameters into the compound interest formula, we have;
1,500 = 1,000(1 + r/12)^{12 × 18}
1.5 = (1 + r/12)^{216}
Taking the 216th root of both sides of the equation, we have:
1.00187891623 = 1 + 0.083333333r
0.083333333r = 1.00187891623 - 1
0.083333333r = 0.00187891623
r = 0.00187891623/0.083333333
r = 2.26
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