1. ## Interest Problems

I need to use the formula

PV=A/(1+i)^n

where:
PV is the present value
A is the final amount
i is the interest per compounding periods
n is the number of compunding periods

Now the question is:

An investment grows from $600 to$1200 in 9 years. If the interest was compounded monthly, what was the annual rate?

2. Originally Posted by VDestinV
I need to use the formula

PV=A/(1+i)^n

where:
PV is the present value
A is the final amount
i is the interest per compounding periods
n is the number of compunding periods

Now the question is:

An investment grows from $600 to$1200 in 9 years. If the interest was compounded monthly, what was the annual rate?
$\displaystyle A = P \left( 1 + \frac{i}{100} \right) ^{n}$

$\displaystyle 1200 = 600 \left( 1 + \frac{i}{100} \right) ^{9 \times 12}$

$\displaystyle 1200 = 600 \left( 1 + \frac{i}{100} \right) ^{108}$

$\displaystyle 2 = \left( 1 + \frac{i}{100} \right) ^{108}$

$\displaystyle \sqrt[108]{2} = 1 + \frac{i}{100}$

$\displaystyle i = 100 \left( \sqrt[108]{2} - 1 \right)$

This gives you the monthly rate.

$\displaystyle 12 \times i = 7.73$
That would be the annual rate.