Question

If you invest in P dollars and you want the investment to grow to A dollars in t years, the interest rate that must be earned if interest is compounded annually is given by the formula r = t√A/P − 1

If you invest $4000 and want to have $8500 in 8 years, what interest rate must be earned? Round to at least 1 decimal place.

Answer 1

. . . 9.88%

Explanation:

Putting the given numbers into the formula, we have ...

`r=\sqrt[12]{(8500)/(4000)}-1\approx 1.098803-1=9.88\%`

The required interest rate is about 9.88%.