To calculate the annual percentage rate (APR) for Tom Selleck's investment account, we can use the formula for compound interest. The formula to find the annual percentage rate (APR) for a compounded amount is:
[ A = P \left(1 + \frac{r}{12} \right)^n ]
Where: - ( A ) is the future value of the investment, - ( P ) is the principal amount (initial investment), - ( r ) is the annual interest rate (decimal), - ( n ) is the number of compounding periods, which in this case is 12 for monthly compounding.
Given: [ A = $3927 ] [ P = $3000 ] [ n = 12 \times 4 = 48 ] (since the investment compounded monthly for 4 years)
We rearrange the formula to solve for the annual interest rate (( r )):
[ r = \left( \frac{A}{P} \right)^\frac{1}{n} - 1 ]
Plugging in the numbers:
[ r = \left( \frac{$3927}{$3000} \right)^\frac{1}{48} - 1 ]
[ r ≈ 0.0667 ]
So, the annual percentage rate is approximately 6.67%. Therefore, the closest answer is C) 6.75%.