Question

Jon has $5,000 to invest in a savings account that has interest compounded annually. If he wants his money to double in eight years, what percent must the interest rate be on the account?

A.4 years
B.5 years
C.6 years
D.7 years

Answer 1

You need this formula
log(1 + rate) = {log(total) -log(Principal)} ÷ Years
we want the money to double so we'll say principal = 100 and total = 200 and we know the years = 8

{log(200) -log(100)} ÷ 8
( 2.3010299957 - 2 ) ÷ 8

.3010299957 / 8
=0.0376287495
Now we raise 10 to the power of that number
10^ 0.0376287495 = 1.0905077328
We subtract 1 = .0905077328
multiplying by 100 makes it

9.05077328%
That's the RATE but the answers are given in years

Answer 2

a 4 years because it is half the number he wants it to double in