Thread: Annual Rate

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

Originally Posted by dc52789

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

use the compound interest formula:



where is the amount after time , is the principal, is the rate of interest, and is the number of times in is compounded per year


here, and you need to find . but this is what you want to happen. after 5 years, you want to become . thus you want



now solve for

Originally Posted by Jhevon

use the compound interest formula:



where is the amount after time , is the principal, is the rate of interest, and is the number of times in is compounded per year


here, and you need to find . but this is what you want to happen. after 5 years, you want to become . thus you want



now solve for

I did 2 = (1+r)^5
Is that right so far?

Originally Posted by dc52789

I did 2 = (1+r)^5
Is that right so far?

yes

P is not zero, so we can divide by it

Originally Posted by Jhevon

yes

P is not zero, so we can divide by it

So...do I put the square 5 on the two to eliminate the 5 on the other side?

Originally Posted by dc52789

So...do I put the square 5 on the two to eliminate the 5 on the other side?

take the 5th root of both sides and continue

Originally Posted by Jhevon

take the 5th root of both sides and continue

is it 0.149 => 15%?

Originally Posted by dc52789

is it 0.149 => 15%?

yeah, around 14.9%