What rate is necessary to double an investment of $4000 in 10 years?
Simple interest: 10%
Compound interest: 7.17735%, nearly.
The percentage interest p for simple interest is given by
4000(1+(10)(p/100))=8000 giving p = 10%.
For compound interest p, the equation to be solved is
This gives p =7.17735%, nearly.
Simple interest rate
The question does not indicate whether the interest is simple or compound interest.
Let's consider both..
The formula to calculate SIMPLE interest:
For the investment to double, the amount of interest has to be $4000.
($4000 invested + $4000 interest = $8000 in total.)
Making R the subject gives
If the interest is compounded annually , the formula is
In reality, neither of these is practical.
Investments do not earn simple interest.
Interest is usually compounded monthly, even daily, but rarely annually.
But the question leads to some nice math calculations.......
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