Answer:
The annual interest rate is 8.78 per cent.
Step-by-step explanation:
The amount paid for security (PV) = $1020
The amount paid in 8 years (FV) = $2000
We have to find the rate of return.
Now, assume i% is the annual interest rate.
Present Value (PV) * (1+i)^n = Future Value (FV)
Future Value (FV) = $ 2,000
Present Value (PV) = $ 1,020
N= 8 years
1,020*(1+i)^8 = 2,000
i = (2,000/1,020)^(1/8) – 1
i = 0.0878 or 8.78%