What annual rate of interest compounded annually should you seek if you want to double your investment in 5 years?

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- Oct 26th 2008, 06:18 AMdc52789Annual Rate
What annual rate of interest compounded annually should you seek if you want to double your investment in 5 years?

- Oct 26th 2008, 11:39 AMJhevon
use the compound interest formula:

$\displaystyle A = P \left( 1 + \frac rn \right)^{nt}$

where $\displaystyle A$ is the amount after time $\displaystyle t$, $\displaystyle P$ is the principal, $\displaystyle r$ is the rate of interest, and $\displaystyle n$ is the number of times in is compounded per year

here, $\displaystyle n = 1$ and you need to find $\displaystyle r$. but this is what you want to happen. after 5 years, you want $\displaystyle P$ to become $\displaystyle 2P$. thus you want

$\displaystyle 2P = P \left( 1 + r \right)^5$

now solve for $\displaystyle r$ - Oct 26th 2008, 11:44 AMdc52789
- Oct 26th 2008, 11:46 AMJhevon
- Oct 26th 2008, 11:54 AMdc52789
- Oct 26th 2008, 12:00 PMJhevon
- Oct 26th 2008, 12:17 PMdc52789
- Oct 26th 2008, 12:20 PMJhevon