Question

Assume that $4,000 I deposited into an investment account doubled in value over a six year period. What annual interest rate must I have earned over this period? Is the initial amount of the deposit relevant to the calculation of the annual interest rate? Why or why not?

Answer 1

Interest rate is about 12.246%

The initial deposit doesn't matter because when you divide both sides by the initial deposit you're always left with (1+i)ⁿ=2

Explanation:

`4000(1+i)^6=8000\\(1+i)^6=2\\1+i=\sqrt[6]{2} \\1+i=1.122462048\\i=.12246`