Try Magic Notes and save time.Try it free
Try Magic Notes and save timeCrush your year with the magic of personalized studying.Try it free
Question

# a. At what interest rate, compounded annually, would you need to invest $500 in order to have$625 in 2 years? b. At this interest rate, how long would it take for your \$500 to double in value?

Solution

Verified
Step 1
1 of 4

a) Let's start, by remember that the formula to determine the future amount of money for certain investment with compound interest is:

$\tag{1}F V=P V\left(1+\frac{r}{k(100)}\right)^{k n}$

where $F V$ is the amount after $n$ years, $P V$ denotes the actual amount, $r$ denotes the rate and $k$ denotes how many compounding periods will be considered per year.

## Recommended textbook solutions #### Oxford IB Diploma Program: IB Mathematical Studies Standard Level Course Book

2nd EditionISBN: 9780198390138Jane Forrest, Jim Fensom, Paula Waldman De Tokman, Peter Blythe
1,190 solutions #### Physics for the IB Diploma

6th EditionISBN: 9781107628199K. A. Tsokos, Mark Headlee, Peter Hoeben
721 solutions  