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tubacrossed
tubacrossed tubacrossed
  • 01-06-2016
  • Mathematics
Answered

At what interest rate (to the nearest hundredth of a percent) compounded annually will money in savings double in five years?

Verified Answer :

Hagrid
Hagrid Hagrid
  • 13-06-2016

For a single payment with compound interest, the equation to use is F=P(1+i)^n where F is the value after n periods, P is the present value, and i is the interest rate.

If we want the final value F to double in 5 years, F is then equal to P then n=5. The equation is now:

2P=P(1+i)^5
2=(1+i)^5
i=14.87% per year

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