Question

What annual rate of interest compounded annually should you find if you want to triple your investment in 4 years?

Answer 1

Formula to calculate interest rate:

`r=n(((A)/(P))^(1/nt)-1)`

A is the amount after t years

P is the principal

n is the number of times interest is compounded per year

t is the time in years

r is the rate in decimal form

For the given situation:

P=P

A=3P (triple your investment)

n=1 (compounded anually)

t=4

`\begin{gathered} r=1(((3P)/(P))^(1/1(4))-1) \\ \\ r=(3^(1/4)-1) \\ \\ r=(1.316-1) \\ \\ r=\text{0}.316 \end{gathered}`Then, the annual rate of interest is 31.6%