What rate is necessary to double an investment of $4000 in 10 years?
2 Answers
Simple interest: 10%
Compound interest: 7.17735%, nearly.
Explanation:
The percentage interest p for simple interest is given by
4000(1+(10)(p/100))=8000 giving p = 10%.
For compound interest p, the equation to be solved is
So,
This gives p =7.17735%, nearly.
Simple interest rate
Coumpound interest
Explanation:
The question does not indicate whether the interest is simple or compound interest.
Let's consider both..
The formula to calculate SIMPLE interest:
For the investment to double, the amount of interest has to be $4000.
($4000 invested + $4000 interest = $8000 in total.)
Making R the subject gives
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
If the interest is compounded annually , the formula is
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
In reality, neither of these is practical.
Investments do not earn simple interest.
Interest is usually compounded monthly, even daily, but rarely annually.
But the question leads to some nice math calculations.......