Question

Ellie wants to double her savings of £8000 by investing her money for 16 years.

What interest rate does
she need to look for?

Answer 1

She need a interest rate of 6.25%

Explanation:

we know that

The simple interest formula is equal to

`A=P(1+rt)`

where

A is the Final Investment Value

P is the Principal amount of money to be invested

r is the rate of interest

t is Number of Time Periods

in this problem we have

`t=16\ years\\ P=\£8,000\\ A=\£8,000*2=\£16,000\\r=?`

substitute in the formula above and solve for r

`16,000=8,000(1+16r)`

`16r=2-1`

`r=1/16`

`r=0.0625`

Convert to percentage

`r=0.0625*100=6.25\%`