Question

A bank says you can double your money in 8 years if you put $2,000 in a simple

interest account. What annual interest rate does the bank pay?
1%
25%
2.5%
12.5%

Answer 1

12.5

Explanation:

2000 / 12.5 = 225

225 x 8 = 200

Answer 2

1%

Assuming that interest is paid yearly,

4000 = 2000*(1+x)^8

2 = (1+x)^8

1 + x = root of 2 in 8th degree (2^1/8)

x = 2^1/8 - 1

x = 0.0905

or 0.01

I.e. 1%